The global canola trade had another significant shift last week with China reducing tariffs on Canadian canola. The response in the Canadian markets was strongly positive, as expected, so it is a good time to have a look at how global supply and prices are shaping up.
The latest update to the United States Department of Agriculture USDA World Agricultural Supply and Demand Estimate WASDE report showed that globally canola growers are on track to produce a record crop.
Figure 1 shows that 2025 to 26 will see a 10.6% increase in canola production, which will lead to a 33% boost in ending stocks. The stocks to use ratio will climb to 13.2%, the highest level since 2018 to 19.
Canola prices have been holding relatively well, at prices above $800 per tonne in Europe and $650 per tonne in Canada. The price difference between Europe and Canada is due to European futures being conventional canola and Canadian being Genetically Modified GM. Both conventional and GM canola are grown here in Australia, and prices tend to follow the futures markets.
The reduction in Chinese tariffs on Canadian canola last week saw ICE Canadian futures rally 6%, putting an end to the downward trend which has been in place since the middle of last year. Locally GM canola prices had also been on the slide, especially recently, but they received a bump from the rally in ICE futures.
Local GM canola values have regained some of the ground lost during harvest, but remain at a significant discount to conventional canola.
The relatively strong conventional canola prices, along with a reasonable crop, saw plenty of selling over harvest, pushing prices lower relative to Matif futures, which also tanked in December. There has been some recovery, Figure 3, but basis, which is the spread between the local price and futures, remains relatively weak.
With the spread between conventional and GM canola over $100 per tonne in the west and around $70 per tonne in the east there is likely still incentive for canola producers to shift to conventional. Additionally, canola is well priced compared to cereals, which might add further impetus for increased canola acreages in 2026.
What does it mean?
Given the strength of supply, canola markets are holding up well. Links with other oilseed and energy markets no doubt help prop up canola values, with consumption growing as quickly as production in recent years.
With canola exporters being relatively concentrated, it does not take much to see a supply shock, which can see prices jump in the first half of the year.
Key Points
- The reduction in Chinese tariffs on Canadian canola saw futures price improve last week.
- Both conventional and GM canola prices have lifted from harvest lows locally.
- Strong canola supply, and price incentive to plant conventional canola could see prices ease this year.
Click on figure to expand
Click on figure to expand
Data sources: Reuters, ICE, Matif, Mecardo, Bloomberg, USDA
