While the outlook for a bumper global rapeseed harvest this year has largely crystallized, factors such as weather disruptions and geopolitical conflicts continue to drive up rapeseed oil prices periodically. As the market enters the fourth quarter, the focus of trading is expected to shift from weather-related themes to export-related selling pressure; with a clear expectation of increased production for Canada's new rapeseed crop, export supplies are set to rise significantly year-on-year.
Against the backdrop of strong expectations for a bumper global rapeseed harvest, ICE rapeseed futures prices recently broke through the C$800/tonne mark. Domestic rapeseed oil futures rose in tandem, with the main contract briefly hitting a three-and-a-half-year high. Weather disruptions, robust biodiesel demand, and geopolitical conflicts have collectively provided the primary support for this round of price increases in rapeseed oil.
Global Rapeseed Production Increase
The latest report from the U.S. Department of Agriculture (USDA) indicates that global rapeseed production for the 2026/2027 marketing year is projected to climb to a record high of 98.09 million tonnes, an increase of 2.41 million tonnes year-on-year. Among major producing regions, output is trending upward in most countries—with the notable exceptions of the European Union and Australia, where production is expected to decline. Canada is projected to increase output by 500,000 tonnes, while Russia and Ukraine are expected to see increases of 900,000 tonnes and 850,000 tonnes, respectively. Driven by the growth in raw material supplies, global rapeseed oil production is forecast to rise to a record peak of 37.60 million tonnes, up 1.26 million tonnes from the previous year.
As the world's largest rapeseed exporter, Canada's production fluctuations have a decisive impact on international rapeseed pricing. The 2026/2027 growing season in Canada was not without challenges. Persistent spring rains delayed planting by approximately one week across the three major producing provinces (Saskatchewan, Alberta, and Manitoba), initially raising market concerns about a potential reduction in acreage for the new crop. However, a planting area report released by Statistics Canada in late June revealed that rapeseed planting area reached a record 23.4416 million acres (9.487 million hectares)—an 8.41% year-on-year increase—rapidly reversing market expectations. As the crop entered its critical growth phase in July and August, major producing regions avoided sustained high temperatures and drought; soil moisture levels remained generally favorable, and the proportion of crops rated "good to excellent" stayed robust. Notably, Saskatchewan—the largest producing province—consistently outperformed both the previous year's figures and the five-year average for this metric. Consequently, Agriculture and Agri-Food Canada has repeatedly raised its canola yield forecasts, lifting the estimate from an initial 2.19 tonnes per hectare to the current 2.3 tonnes per hectare, while the total production forecast was increased from 19.2 million tonnes to 21.6 million tonnes. Given that the yield stood at 2.51 tonnes per hectare last season, there remains potential for further upward revisions, raising hopes that final production could set a new record. Harvesting began in mid-August, and data regarding yields and total output will become clearer as the process advances.
Harvesting of the EU canola crop concluded in late July. Although planted area expanded by 5% year-on-year to 638,500 hectares, the crop faced adverse weather—including frost and drought—during the growing season. As a result, yield estimates were progressively lowered to 3.09 tonnes per hectare, with final production projected at 19.586 million tonnes, a year-on-year decrease of 580,000 tonnes. However, as harvest results have confirmed production levels, the market has already largely priced in these expectations of reduced output.
Australian canola continues to face weather-related disruptions.
The third quarter is a critical growth period for Australian canola, a crop highly sensitive to precipitation and temperature fluctuations; Australia's geographical location makes it particularly vulnerable to weather impacts. Monitoring by the Australian Bureau of Meteorology confirmed the onset of El Niño in June, with the phenomenon intensifying to its peak during the winter months. Typically, El Niño brings abnormally dry conditions to eastern Australia, affecting the three major producing states—New South Wales, Victoria, and South Australia—which collectively account for approximately 48% of total production.
Simultaneously, multiple meteorological agencies predict the development of a positive Indian Ocean Dipole (IOD) phase. Data from the Australian Bureau of Meteorology shows the IOD index has exceeded the threshold for three consecutive weeks, with a positive phase likely to be officially established within the next one to two months. A positive IOD phase generally leads to drier conditions in western Australia, where the Western Australia producing region accounts for roughly 52% of total output. When El Niño coincides with a positive Indian Ocean Dipole (IOD), Australia faces drought stress on both its eastern and western coasts; the more than 28% drop in Australia's 2023 rapeseed production was precisely the result of the combined impact of these two major climate factors. Over the past two months, average precipitation across Australia was 39.2% below the 1961–1990 baseline—the lowest level for this period since 2020—with rainfall in western, eastern, and southern coastal regions generally falling below historical averages. The national average temperature was 1.14°C above the baseline, marking the highest level since 2023. Looking ahead to the coming month, the risk of high temperatures and drought persists in major producing regions, and precipitation in the southeast is expected to remain significantly below normal levels.
The planting sector is also facing pressure to contract. A second-quarter report from the Australian Department of Agriculture projects that rapeseed planting area for the 2026/2027 season will decrease by 5.6% year-on-year to 3.495 million hectares. This decline is driven by two main factors: first, drought in major producing regions during the early sowing phase resulted in soil moisture levels far below those of the previous year, hindering planting progress; second, the conflict between the US and Iran drove up global fertilizer prices—with Australian nitrogen fertilizer prices nearly doubling—significantly raising cultivation costs for rapeseed, a crop that is highly dependent on nitrogen fertilizer. Faced with drought risks and cost pressures, farmers are proactively switching to crops such as barley, which are more drought-tolerant and require less nitrogen fertilizer.
Taking into account both the decline in yield per hectare and the reduction in planting area, Australia's rapeseed production for the year is expected to fall by nearly 20% year-on-year to 6.184 million tonnes. September marks the final critical period for crop growth, and weather developments warrant continued monitoring.
Strong Demand for Biodiesel
In recent years, Canada's rapeseed crushing volume has steadily risen, driven primarily by growing export demand for rapeseed oil; approximately 70% of the country's rapeseed oil is exported. For the 2026/2027 season, Canada's rapeseed crushing volume is projected to reach 13.7 million tonnes, an 8% year-on-year increase. Rapeseed oil production is expected to grow by 7% to 5.825 million tonnes, with exports poised to hit a record high of 4 million tonnes. The export landscape is undergoing a profound transformation. Currently, over 95% of Canada's rapeseed oil exports are destined for the U.S. market; although the export share dropped last year due to adjustments in U.S. biodiesel policy, it remained substantial at 77%. Regarding policy, the U.S. Department of the Treasury briefly excluded Canadian rapeseed oil from the Clean Fuel Production Credit (45Z) in February of last year, dealing a severe blow to exports. However, in February of this year, the Treasury’s proposed 45Z rules confirmed that Canadian canola qualifies as an eligible feedstock for the tax credit. Furthermore, the final Renewable Volume Obligation (RVO) rule issued in March raised biodiesel blending mandates for 2026–2027, providing strong momentum for Canadian rapeseed oil exports.
Simultaneously, Canada is ramping up domestic policy support. The federal government plans to invest over C$370 million between 2026 and 2027 to incentivize domestic biofuel production. Individual facilities can receive annual subsidies of up to approximately C$40.2 million, provided they utilize Canadian-grown feedstocks (such as canola, wheat, or corn). This initiative has directly boosted domestic demand for rapeseed oil, creating a dual-support system alongside the expanding export market.
Uncertainty in the Black Sea Region
Over the past two months, the Russia-Ukraine conflict—now in its fourth year—has escalated again. Geopolitical risks have returned to the forefront of market attention, injecting a significant risk premium into rapeseed oil futures. A sharp rise in international canola prices has driven up domestic CNF (Cost and Freight) quotes for imported Canadian canola, with import costs (inclusive of a 14.9% tariff and 9% VAT) briefly climbing above 5,700 yuan per tonne.
Since 2022, China has imported large quantities of rapeseed oil from the Black Sea region, with imports peaking at over 65% of the total volume; Russia was the primary source, accounting for more than 58%. However, since late last year, shipments of Russian non-GMO rapeseed oil have faced rejection and return by China after testing positive for genetically modified (GM) components. Throughout this year, additional batches have failed to meet my country's non-GMO standards, leading to the suspension of export privileges for several Russian exporters. In early August, Russia launched a rigorous inspection campaign targeting domestic genetically modified (GM) rapeseed; consequently, many processing plants have been unable to obtain phytosanitary certificates, and some farms in the central region have voluntarily destroyed their GM rapeseed crops.
At present, both the trajectory of the Russia-Ukraine conflict and the issue of Russian GM rapeseed remain unresolved; these factors will continue to serve as significant sources of uncertainty and volatility for future rapeseed oil market trends.
While the outlook for a bumper global rapeseed harvest this year has largely been confirmed, factors such as weather disruptions and geopolitical conflicts continue to drive up rapeseed oil prices periodically. As the market enters the fourth quarter, the focus of trading is expected to shift from weather-related concerns to export-related selling pressure; expectations for increased production of the new Canadian rapeseed crop are clear, pointing to a significant year-on-year rise in export supplies.
On the domestic front, imports of Canadian rapeseed have gradually resumed since March, with monthly arrival volumes stabilizing above 500,000 tonnes since May, leading to a steady accumulation of supply pressure. Although processing plant operating rates remain low—keeping rapeseed oil production from rising significantly and resulting in a slower-than-expected pace of inventory accumulation—the supply pressure is highly likely to be deferred. With the arrival of the new Canadian rapeseed crop in bulk, supply pressure for both rapeseed and rapeseed oil is expected to peak around the end of the year.
Overall, rapeseed oil futures prices are expected to maintain a pattern of wide fluctuations at high levels, lacking the momentum for a sustained upward trend; regarding the inter-month structure, the trend of "strong near-term, weak long-term" prices is likely to persist. (Source: Futures Daily)
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