SunSirs: China-Canada Relations Repair May Open New Import Source for Chinese Canola Oil

1. Global Canola Production Shows Modest Recovery, Yet Major Producers' Export Challenges Persist

Canada and the European Union are the world's two largest canola producers, accounting for over 65% of global output. During the 2024/25 season, both major producers—Canada and the EU—experienced production declines. The EU, in particular, endured unusually severe cold and frost conditions, with Eurostat reporting a year-on-year drop exceeding 13%. This ultimately led to a significant tightening of global rapeseed supply for the 2024/25 season. For the 2025/26 season, the U.S. Department of Agriculture (USDA) projects global rapeseed production at 92.27 million metric tons, a 7.3% increase from the previous year. The EU will contribute the bulk of this growth, rebounding from last season's decline with a nearly 20% production surge to reach its second-highest output level in a decade.

As the EU primarily relies on domestic production for its own consumption, Canada has emerged as the world's leading rapeseed exporter. Canada's rapeseed harvest is now complete. According to October data from Agriculture and Agri-Food Canada, despite a 2% year-on-year decrease in planting area for the 2025/26 season, excellent yields have set the stage for a bumper crop. Canada's rapeseed production for 2025/26 is projected at 20.028 million tons, a 12% increase from the previous year. However, despite increased production, exports are projected to decline, primarily due to obstructed shipments to China. China's anti-dumping investigation and high tariffs on Canadian canola have significantly reduced Canada's exports to China this year. According to Statistics Canada data, Canadian canola exports began plummeting in May this year. After August, monthly exports nearly halved year-on-year, causing a sharp surge in Canada's ending stocks and significant pressure. It is precisely these export barriers to China that have created a disconnect between Canada's domestic pressures and international market prices, including those for rapeseed varieties in China. Therefore, under the current trade framework, two potential price transmission pathways exist: First, if tensions between China and Canada persist, exports remain obstructed, and raw material supply constraints continue to underpin rapeseed prices; Second, if Sino-Canadian relations ease and trade flows resume, China's raw material shortages would ease. However, concurrent increases in Canadian exports—coupled with limited production growth—would accelerate inventory drawdowns. In this scenario, Chinese rapeseed oil prices would be caught between cost-support dynamics and the easing import pressure narrative.

2. Final Ruling on “Anti-Dumping Investigation” May Impact Rapeseed Oil Pricing Framework

(1) The trajectory of China-Canada economic relations will continue to catalyze trend-driven market movements

Since September last year, China has initiated an anti-dumping investigation into Canadian rapeseed and filed a complaint with the WTO. The subsequent ruling on whether to impose anti-dumping duties on Canadian rapeseed is still pending. Recent interactions between China and Canada have sparked market expectations of improved trade relations. In September this year, the prime ministers of China and Canada met in New York, agreeing to establish “regularized” communication channels. On October 17, Foreign Minister Wang Yi held talks with Canadian Foreign Minister Anand in Beijing, confirming the resumption of dialogue and consultation mechanisms across diplomatic, economic, agricultural, energy, tourism, and cultural sectors. Reuters reported that Canada has granted tariff exemptions on certain steel and aluminum products originating from the United States and China. However, before the final outcome materializes, we cannot make particularly clear predictions. What can be confirmed is that whichever direction the result takes, it will catalyze a trend-driven movement in the oil market. On one hand, the current market has already priced in significant extreme supply-demand contradictions and risk premiums stemming from the deterioration of China-Canada relations. On the other hand, whether the China-Canada canola supply channel is completely severed could signify a complete restructuring of China's canola trade landscape, with market sentiment amplifying price volatility. Close attention should be paid to the final ruling on China's anti-dumping case against Canadian canola in March 2026.

(2) Exploring Diverse Import Sources to Provide Backup Supply Assurance

While the final ruling in the anti-dumping case may trigger a wave of trend-driven market movements, its impact and sustainability will be significantly less pronounced than in 2019-2020. This is because we have been continuously exploring multiple import pathways, which now serve as regulators for supply. Following this market surge, rapeseed oil price trends will focus on the pricing system established after the restructuring of trade flows.

In 2024, China imported 6.39 million tons of rapeseed, with 6.126 million tons sourced from Canada—accounting for 95.8% of total imports. Canada remains China's dominant rapeseed supplier. Amid this year's successive anti-dumping and anti-discrimination investigations, coupled with China's large-scale suspension of Canadian rapeseed imports, Australia and Russia have emerged as critical alternative channels. After years of phytosanitary and diplomatic friction, China quietly reopened its previously suspended five-year import channel for Australian rapeseed. Selecting a window period when Australian supply was cheapest and shipping capacity available, COFCO Group ordered approximately 50,000 tons of in-season rapeseed. Reports indicate the shipment arrived in China around November 22 and may face over three weeks of routine customs inspection. However, the true commencement of China-Australia rapeseed trade hinges on the potential for more enterprises to engage in commercial vessel charters. In recent years, China's annual rapeseed oil imports have averaged around 1.8 million tons, with primary sourcing shifting from Canada to Russia. From January to October 2025, China's cumulative rapeseed oil imports reached 1.74 million tons—significantly higher than the 1.46 million tons during the same period last year—with Russia's share further increasing. According to FAS data, Russia's rapeseed production for the 2025/26 season is projected at 5.5 million tons, an increase of 850,000 tons year-on-year. This expansion in Russian rapeseed output is expected to drive corresponding increases in rapeseed oil production and exports.

Domestic inventories still hold room for drawdown, with the tight supply-demand balance continuing to provide price resilience.

Turning to the domestic spot market, extreme inventory fluctuations fully reflect this year's core supply-side themes and contradictions. Since the imposition of provisional anti-dumping duties on Canadian rapeseed imports in August 2025, import volumes have plummeted. As of the week ending November 21, coastal oil mills held only 24,500 metric tons of rapeseed inventory, forcing successive port mill shutdowns and driving domestic rapeseed oil output to low levels. Direct imports of rapeseed oil are currently propping up domestic inventories, yet they remain insufficient to offset the decline in rapeseed imports. While the 377,000-ton inventory level as of November 21 still represents a relatively high point over the past five years, it has already fallen below the year-on-year level of the same period in 2024. More significantly, it has declined by over 50% from the May peak of 800,000 tons.

While rapeseed oil demand remains persistently weak with no notable bright spots, pickup volumes have been relatively stable. Until the China-Canada trade channel reopens, commercial purchases of Australian rapeseed are not fully open, and Russian rapeseed oil supplementation remains limited, overall production will continue to be constrained. Oil mills are expected to maintain their inventory drawdown mode. Therefore, at least until the final ruling on the anti-dumping case is announced in Q1 next year, the trend toward tighter domestic rapeseed oil supply and demand is relatively certain, continuing to provide resilient price support for edible oils. Whether the subsequent supply tightness can ease will depend decisively on the trajectory of international relations and policy support for restructuring rapeseed trade flows.

Conclusion

Looking ahead to 2026, the oilseeds sector will undergo a new round of pricing dynamics centered on supply-demand conflicts triggered by two key uncertainties: international trade relations and biodiesel policies, against the backdrop of a globally tight supply-demand balance in the vegetable oil market. For rapeseed oil, the tight supply pattern established in the first quarter will persist, maintaining a firm tone. The primary uncertainty centers on the final ruling of the anti-dumping case at the end of Q1. We outline two potential scenarios: If China-Canada relations ease, a wave of sentiment-driven declines may occur, after which the resolution of supply-demand imbalances in Canada—the primary production region—will reassert itself as the dominant pricing logic. If China-Canada tensions persist, rapeseed oil will likely lead an upward rally. Even as trade flows shift toward Australian rapeseed and Russian rapeseed oil, the limited volume and higher costs of these alternatives make it difficult to significantly alter the tight supply-demand balance. Overall, rapeseed oil will maintain relative strength until trade flows clarify. Subsequent price pressure will depend on whether Canadian rapeseed supply structures can be restored.

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