Grain Snippet: Canola Pulls Back as Oil Markets Ease
Canola markets have eased over the past week after a strong run through July and early August. Adelaide new-season non-GM canola fell from around A$832/MT on 18 August to A$812/MT by 24 August, while GM values fell from A$805/MT to around A$785/MT. The fall was mainly futures-driven, with both MATIF rapeseed and ICE canola pulling back from recent highs. Despite this correction, the broader technical trend remains relatively firm, with Adelaide values still well above March levels and MATIF above its 20-day moving average.
Crude oil remains one of the largest influences on oilseed markets. WTI crude climbed sharply as the US-Iran conflict restricted shipping through the Strait of Hormuz, lifting biofuel values and supporting vegetable oils. More recently, WTI has fallen back towards US$81/barrel after Iran and Oman resumed talks over a temporary shipping corridor. This easing has removed some of the recent support from canola and soybean oil prices.
The broader vegetable oil complex remains mixed. US soybeans are being supported by renewed Chinese buying, although expectations for a large US crop are limiting gains. Palm oil remains relatively firm following Indonesia’s move to a B50 biodiesel mandate, increasing domestic palm oil demand. US biofuel policy also remains important, although uncertainty around refinery exemptions and delayed compliance deadlines has recently pressured renewable fuel credits and soybean oil.
Australian crop prospects have improved considerably since ABARES released its June forecast of 6.2 MMT. Conditions across SA and Victoria have remained favourable, while August rainfall has improved prospects in parts of NSW. Our current Australian canola estimate is around 7.6 MMT, including approximately 0.70 MMT in SA and 1.43 MMT in Victoria. This would leave national production only slightly below last season, rather than the sharp decline currently reflected in the ABARES forecast.
Canada is also expected to produce another large crop. Agriculture Canada currently forecasts 21 MMT, while the USDA is higher at 22.5 MMT. Canadian domestic crush demand remains strong, with the USDA forecasting a record 13.7 MMT crush in 2026/27. This continues to reduce the proportion of seed available for export and ties Canadian canola more closely to North American biofuel demand.
The recent escalation in US-Canada trade tensions initially added pressure to ICE canola. The US has imposed 50% tariffs on selected Canadian goods, with Canada announcing matching counter-tariffs from 8 September. Importantly, canola is not directly included in the new US tariff measures. The larger issue for canola is broader trade uncertainty, particularly because the US is the dominant destination for Canadian canola oil.
Geopolitical risk remains high. Black Sea attacks have severely disrupted agricultural shipping from both Ukraine and Russia, increasing freight and insurance costs and helping underpin European rapeseed values. At the same time, any change in shipping access through the Strait of Hormuz can quickly move crude oil and the wider vegetable oil complex. For canola, crop size, energy markets and geopolitical developments are competing for control of price direction.
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