Grain Snippet: Crude Oil Prices Flow Through to Canola
The SA canola crop is off to a cracking start with seeding underway and plants out of the ground in some early regions in the first week of April. Well above March rainfall through SA has provided growers with confidence to seed this year canola crop after dropping some areas over the past two seasons due to the late break. Growers continue to weigh up how much canola to sow, comparing the rotational benefits of the crop against the high input cost, including nitrogen fertilizer, particularly this season. Assisting in the decision to plant canola are 26/27 season forward prices circa $770-$790/MT, which at decile 8.5, are relatively high compared to cereal prices.
Canola prices for the 26/27 season continue to push higher from $725/MT in February to around $780/MT at the time of writing, supported by a rally in crude oil prices. Canola, and other vegetable oils including soybean and palm oil are used to manufacture biofuel which competes with petroleum and diesel. Europe is the primary destination for SA non-GM canola for the manufacture of ISCC biofuel. Annual European domestic consumption of rapeseed is roughly 25MMT and with annual production of rapeseed in Europe sitting around 19MMT annually, imports are required to make up the shortfall.
Crude oil prices have rallied on the continued conflict in the Middle East between the US, Israel and Iran. As part of the conflict, Iran has closed the Strait of Hormuz, which has severely restricted the global trade flow of crude oil, subsequently sending prices soaring. Price volatility has been high as pronouncements from both sides have impacted positively and negatively on price. Vegetable oil prices (including rapeseed, canola soybean and palm oil) have followed a similar pattern although less extreme. The high price volatility in crude oil is due to supply disruption whereas the vegetable oil prices have been less extreme as the global balance sheet of oilseeds is unchanged.
Supporting 26/27 SA canola prices has been a rally in EU rapeseed futures and Canadian canola futures. Influencing futures prices has been the activities and involvement of funds in the futures market. In late December when prices were around C$620/MT, Funds held a net short (sold) position in Canadian canola futures of 95k contracts. Through the first 3 months of 2026, Funds have dramatically flipped their position to be now 86k contracts long (bought). Over this period prices have rallied by roughly C$120/MT to reach levels around C$740/MT.
Global supply of oilseed is likely to decline due to an announcement last week by the Indonesian government to increase the percentage of palm oil in domestic biofuel from 40% to 50%. This effort is aiming to support local palm oil growers and lower the cost of domestic fuel. The move would remove 2.5MMT of palm oil for export annually which is equivalent to 6MMT of canola seed (at 42% oil).
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