Against the backdrop of a strong expectation for a bumper global rapeseed harvest, ICE rapeseed futures prices have strongly broken through the 800 Canadian dollars per ton threshold recently, and domestic rapeseed oil futures prices have risen in tandem, with the main contract once hitting a 3.5-year high. Weather disruptions, strong biodiesel demand and geopolitical conflicts together form the main support for the upward trend in rapeseed oil prices in this round.

Global Rapeseed Production Increase

According to the latest report from the United States Department of Agriculture (USDA), the global rapeseed production is projected to climb to a historical high of 98.09 million metric tons in the 2026/2027 marketing year, an increase of 2.41 million metric tons year-on-year. Among the major producing regions, only the European Union and Australia are expected to see a decline in output, while all other countries are set to increase production. Specifically, Canada is projected to boost its output by 500,000 metric tons, with Russia and Ukraine forecasting respective increases of 900,000 metric tons and 850,000 metric tons. Driven by the growth in raw material supply, the global rapeseed oil production is expected to reach a historical peak of 37.6 million metric tons, an increase of 1.26 million metric tons compared to the previous marketing year.

As the world's largest exporter of rapeseed, Canada's output changes have a decisive impact on international rapeseed pricing. The rapeseed growing process in Canada for the 2026/2027 marketing year was not smooth sailing. Persistent spring rainfall delayed sowing in the three major producing provinces (Saskatchewan, Alberta, and Manitoba) by about a week on average, and the market once worried about a decline in the planting area for the new crop. However, the planting area report released by Statistics Canada at the end of June showed that the rapeseed sown area hit a record high of 23.4416 million acres (9.487 million hectares), an increase of 8.41% year-on-year, which quickly reversed market expectations.

Entering the critical growth period from July to August, no persistent high-temperature droughts have occurred in the main producing areas. The overall soil moisture condition is good, and the crop yield quality rate has maintained a steady performance. The yield quality rate in Saskatchewan, the largest producing province, has continued to be higher than the same period last year and the five-year average. Based on this, Agriculture and Agri-Food Canada has continuously raised the rapeseed yield forecast, from an initial 2.19 tons per hectare to the current 2.3 tons per hectare, and the output forecast has also been increased from 19.2 million tons to 21.6 million tons. Compared with the yield level of 2.51 tons per hectare in the previous year, there is still room for a further upward revision of the yield in the future, and the final output is expected to set a new historical record. Harvesting of Canadian rapeseed started in mid-August, and with the progress of the harvesting process, the yield and output data will become increasingly clear.

The harvest of rapeseed in the European Union was completed at the end of July. The planting area for this marketing year has expanded to 638,500 hectares, an increase of 5% year-on-year. However, the crop successively suffered adverse weather conditions such as frost and drought during the growing season, leading to a continuous downward revision of the yield estimate to 3.09 tons per hectare. The final output is expected to reach 1.9586 million tons, a decrease of 580,000 tons compared with the previous year. Nevertheless, with the harvest determining the output, the expectation of reduced production has been fully priced in the early trading.

Australian Rapeseed Still Disturbed by Weather

The third quarter is a critical growth period for Australian rapeseed, which is extremely sensitive to precipitation and temperature changes. Australia's geographical location makes it highly vulnerable to weather impacts. According to monitoring by the Australian Bureau of Meteorology, the El Niño phenomenon was confirmed to have occurred in June and continued to strengthen to its peak in winter. Normally, the El Niño phenomenon will cause abnormally dry conditions in eastern Australia, affecting the three major producing areas of New South Wales, Victoria and South Australia (accounting for about 48% of the total output).

Meanwhile, multiple meteorological institutions predict that a positive phase of the Indian Ocean Dipole (IOD) is developing. Data from the Australian Bureau of Meteorology shows that the IOD index has exceeded the threshold for three consecutive weeks, and the positive phase is expected to be formally established in the next one to two months. A positive IOD usually tends to dry out western Australia (the output of the western Australian production area accounts for about 52%).

When El Niño resonates with the positive IOD, both sides of Australia will face drought pressure simultaneously — the 28%+ drop in Australia's rapeseed production in 2023 is exactly the result of the combined effect of these two major climatic factors. Judging from the actual performance in the past two months, the average precipitation across Australia was 39.2% lower than the baseline value from 1961 to 1990, the lowest level for the same period since 2020; precipitation in the western, eastern and southern coastal regions was generally below normal. The average temperature across Australia was 1.14°C higher than the baseline, the highest since 2023. Looking ahead to the coming month, the risk of high temperature and drought in major producing areas will persist, and precipitation in the southeastern region is expected to be significantly below normal.

The planting sector is also facing contraction pressure. The Australian Department of Agriculture's Q2 report estimated that the rapeseed planting area in the 2026/2027 marketing year will decrease by 5.6% year-on-year to 3.495 million hectares. The decline in planting area is mainly affected by two factors: first, the main producing areas suffered from drought at the initial stage of sowing, and the soil moisture was far lower than the same period last year, which restricted the progress of sowing; second, the conflict between the United States and Iran pushed up global fertilizer prices, and the price of nitrogen fertilizer in Australia almost doubled. As rapeseed is a nitrogen-intensive crop, its planting cost has risen sharply. Faced with drought risks and cost pressures, farmers have actively switched to planting more drought-tolerant crops with lower nitrogen fertilizer demand such as barley.

Combining the decline in per unit yield and the reduction in planting area, Australia's rapeseed output is expected to decrease by nearly 20% year-on-year to 6.184 million tons this year. September will be the final critical period for crop growth, and weather changes still warrant continuous attention.

Strong Demand for Biodiesel

Canada's rapeseed crushing volume has been rising steadily in recent years, with the core driving force coming from the growth in rapeseed oil export demand. Approximately 70% of Canada's rapeseed oil is exported. For the 2026/2027 marketing year, Canada's rapeseed crushing volume is projected to reach 13.7 million tons, an 8% year-on-year increase; rapeseed oil output is expected to rise 7% to 5.825 million tons, with exports likely hitting a record high of 4 million tons. The export landscape is undergoing a profound reshaping. Currently, over 95% of Canada's exported rapeseed oil is sold to the United States. Although the share of exports to the US declined last year due to adjustments to US biodiesel policies, it still stood at a high 77%. At the policy level, in February last year, the US Department of the Treasury briefly excluded Canadian rapeseed oil from the Clean Fuel Production Tax Credit (45Z), dealing a heavy blow to Canada's rapeseed oil exports. In February this year, the US Department of the Treasury's proposed 45Z rule confirmed that Canadian rapeseed meets the feedstock requirements and is eligible for the tax credit; in March, the final Renewable Volume Obligation (RVO) further raised the biodiesel blending mandate for 2026-2027, injecting strong momentum into Canada's rapeseed oil exports.

Meanwhile, policy support in Canada is also being strengthened. The Government of Canada plans to invest more than 370 million Canadian dollars in 2026-2027 to incentivize domestic biofuel production. A single production facility can receive a maximum subsidy of about 40.2 million Canadian dollars per year, provided that it uses Canadian domestic raw materials (such as rapeseed, wheat, corn, etc.). This measure has directly boosted domestic rapeseed oil demand in Canada, providing dual support along with the expansion of export markets.

Uncertainty Looms Over the Black Sea Region

In the past two months, the Russia-Ukraine conflict, which has lasted for four years, has escalated again, and geopolitical risks have once again become the focus of the market, injecting a significant risk premium into rapeseed oil futures. The prices of rapeseed on the external market have risen sharply, driving up the CNF (Cost and Freight) quotes of imported Canadian rapeseed in China, and the import cost (including 14.9% tariff and 9% VAT) once climbed to more than 5,700 yuan per ton.

Since 2022, China has imported a large volume of rapeseed oil from the Black Sea region, which at its peak accounted for more than 65% of China's total rapeseed oil imports. Among them, Russia has been the main source of imports, accounting for over 58%. However, since the end of last year, China has returned shipments of Russian non-GMO rapeseed oil due to the detection of genetically modified (GM) components. This year, more batches have been found to fail to meet China's non-GMO standards, and the export qualifications to China of multiple Russian exporters have been suspended. In early August this year, Russia launched a strict inspection on genetically modified rapeseeds in its domestic market. A large number of oil mills have been unable to obtain phytosanitary certificates, and some farms in the central region have voluntarily eradicated genetically modified rapeseeds.

At present, the direction of the Russia-Ukraine conflict and the issue of genetically modified rapeseed in Russia remain unresolved, and both will continue to be important uncertain variables disturbing the future rapeseed oil market trend.

The global rapeseed bumper harvest pattern for this year is basically clear, but factors such as weather disturbances and geopolitical conflicts still push up rapeseed oil prices in phases. In the fourth quarter, the market's trading focus is expected to shift from weather-related themes to export selling pressure—Canada's rapeseed output in the new crop is expected to increase significantly, and export supply will rise year-on-year.

On the domestic front, imports of Canadian rapeseed have resumed successively since March this year, and the average monthly arrival volume has stabilized at over 500,000 tons since May, with supply pressure continuing to accumulate. Although the current operating rate of oil mills remains low, rapeseed oil production has not increased significantly, and the pace of inventory accumulation is also slower than expected, the supply pressure will most likely be deferred. With the concentrated arrival of new Canadian rapeseed crops, the supply pressure on 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, with insufficient drivers for a trend rally; in terms of the monthly structure, the trend of near-month strength and far-month weakness is expected to continue.

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