Grain Snippet: Canola Prices follow Crude Oil Lower
New season canola prices spiked to $885/MT in late June following crude oil higher as tensions escalated in the Middle East with military action between Israel and Iran. Crude oil prices pulled back on the ceasefire announcement between the two countries with canola prices following crude oil lower. More than 25% of global vegetable oil is used for biofuel production and therefore canola prices are corelated with crude oil prices. OPEC+ has increased crude oil production by 600,000 barrels per day from 1st August and this production increase has seen WTI crude oil prices fall from US$70/barrel to US$64/barrel. Canola prices have pulled back from $835/MT to $810/MT over the same period.
South Australian canola prices have also eased as the European rapeseed (canola) harvest looks to come to an end. European stocks of rapeseed were very low going into harvest due to poor production last season. EU 25/26 rapeseed production is forecast 18.5MMT, down 0.4MMT on the June estimate but up 1.9MMT (11%) y/y following an excessively wet 24/25. The EU crushes around 25MMT of rapeseed annually and import rapeseed from Ukraine and canola from Australia to add to supply.
The Canadian canola harvest has just commenced, and Stats Canada has forecast production at 17.8MMT down 1.4MMT y/y. This is at odds with the USDA forecast of 19.2MMT and with growing conditions across the Canadian Prairies improving from a dry start, we are leaning towards the larger estimate. Canada is set to crush 11.5MMT of canola seed, with most of the oil exported to the US where is competes with soy oil into the biofuel market. Canadian canola prices lifted in Monday trade as US President Trump suggested China quadruple their purchases of US soybean, which lifted soybean futures.
Canadian canola futures prices have also been influenced by market speculators. Managed funds started buying canola futures in March this year reducing their short position to be record-long at approximately 175,000 contracts (3.5MMT equivalent) in June. This saw the price rally from C$580/MT to C$750/MT over this period. Since mid-June Funds have sold off more than half this long position but remain long (bought) 74,000 contracts. The sell-off contributed to the price subsequently drifting back to circa C$680/MT.
Canadian canola seed exports are facing a potential headwind with their major buyer-China. China placed a 100% tariff on Canadian canola oil and meal imports in March 2025, which has seen that trade dry up. In September 2024, China commenced an inquiry into the alleged dumping by Canada of canola seed into Chinese markets, with a report deadline of September 2025. This is seen as a precursor to retaliatory tariffs being applied to Canadian canola imports (similar to Australian barley). China is the largest importer of Canadian canola seed accounting for 5MMT annually. A tariff could see Canada looking for new export markets competing with existing Australian GM canola destinations. Australia could pivot to China however there are some biosecurity issues in China that would need to be resolved first.
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