Canola’s Demand Boom

Thursday, August 27, 2026

Biofuel growth & domestic crush expansion are reshaping the outlook for prairie canola production.

By Richard Kamchen

Crop growers in Western Canada are producing more and more canola, but when is so much canola too much canola?

To understand whether rising Prairie canola production risks oversupply, the equation requires getting a handle on supply and demand.

“And both are unknown at this time,” says AgChieve Grain Marketing Advisory head David Drozd.

“While it’s easier to see the pile of canola, so to speak, demand is invisible, and it comes and goes.”

He says that the higher canola prices go, the more acres farmers will put in the ground.

“Canola is one of the few crops that are profitable,” Drozd points out.

Statistics Canada’s spring planting intentions report stated that farmers expected this year’s canola area to increase one per cent from a year ago to 21.8 million acres, a number roughly in line with the five-year average.

Keep it coming?

Similar acreage a year ago, combined with favourable growing conditions, produced a bin-busting record crop of nearly 22 million tonnes.

Back in 2014, the Canola Council of Canada (CCC) anticipated the need for even greater output. The industry group’s ‘Keep it Coming’ target called for domestic production of 26 million tonnes in 2025 to meet its expectations of future global demand.

Since then, demand’s surged along with increasing output, but it’s highly concentrated.

About 90 per cent of Canada’s canola is exported as seed, oil, or meal, and the U.S. and China account for approximately 90 per cent of that.

“There is always some risk in being heavily concentrated on only one or two markets,” says Jonathon Driedger, vice-president of LeftField Commodity Research.

The biggest risks, as canola farmers and the rest of the sector discovered, are trade disputes and other policy shifts.

U.S. demand

Driedger sees some underestimation of the U.S. market’s importance to Canadian canola.

“That is the one market that would cripple our industry,” he says.

If the U.S. were to essentially cut off its canola imports from Canada, the effects would be far more serious than when China last slammed its door to Canadian canola.

Driedger: “I hope that’s not the case, although, in these uncertain times, I suppose anything can happen.”

The U.S. is Canada’s top export destination for canola oil — driven by food use and a growing biofuel market — as well as meal. CCC reports the U.S. imported 2.5 million tonnes of canola oil from Canada in 2025, down from a record 3.3 million in 2024, and another 4.1 million tonnes of canola meal.

Brittany Wood, senior policy manager of trade and transportation with the Canadian Canola Growers Association (CCGA), says that when the U.S. Environmental Protection Agency finalized the Renewable Fuel Standard in March, announcing Renewable Volume Obligations for 2026 and 2027, it created a strong market demand signal for canola oil into the U.S.

“This announcement supports the demand for canola oil as a feedstock in U.S. biofuel production, thus supporting canola seed market demand for Canadian farmers,” she says.

Driedger cautions that the governmental policy nature of biofuel demand might be a risk, but also questions the biofuel market’s vulnerability given widespread demand for it, from farmers to environmentalists and those just concerned about fuel price spikes.

“Of course, policy winds can change over time, so one can’t assume this demand will be ‘bulletproof’ indefinitely,” he warns.

China

China is Canada’s top canola seed customer, but trade shocks over the years have given producers and exporters a bumpy ride, to say the least.

China’s 2025 imports of canola seed from Canada fell below half of its 2024 volumes during the countries’ last trade disruption, during which China imposed tariffs of 75.8 per cent on the product. CCC pegged those imports at 2.1 million tonnes.

Japan is the only sizable alternative export market for seed. The country bought 1.7 million tonnes of canola seed from Canada in 2025, but CCC notes lower exports to Japan in recent years due to market dynamics. But despite China withdrawing from the market, the effects were muted.

“Even with China absent from canola seed and product purchases from Aug. 1 through Feb. 28, crop year exports are only lagging 1.2 million tonnes,” says Tony Tryhuk, branch manager of futures trading with RBC Dominion Securities.

This, he says, demonstrates that price-elastic demand exists throughout the world, which gives Canada alternative markets should any one country lock out its canola.

“Certainly, this year proves that our primary buyer can cut all purchases, and it only impacts demand in the area of 15 per cent,” Tryhuk says.

European Union

Another fairly significant destination for Canadian canola seed is the EU, which uses it primarily for biofuel production. “The EU remains an important market for canola seed, with export volumes fluctuating annually,” says Wood.

Those fluctuations can be significant, as the EU bought only 89,167 tonnes in 2023, but a record 2.5 million tonnes in 2020, CCC states. The EU took 1.6 million tonnes of canola seed from Canada in 2025.

Driedger expects the EU will remain a consistent market for Canada, but doesn’t expect its demand to be “the answer” if Canada suddenly loses access to U.S. or Chinese markets.

“We moved more seed, and a bit of oil and meal when we were closed to China, which helped, but the volumes were not large enough to ‘solve the problem,’” Driedger says.

Domestic biofuel-driven crush offers hope

It’s a growing domestic crush that’s become the hoped-for boon that’ll soften the blow from trade shocks.

Canadian oilseed processors reached a third consecutive annual record after crushing 11.6 million tonnes of canola in 2025, Statistics Canada revealed in its annual crush report. About half of the canola grown in Canada is processed domestically, the department said.

For 2026, up to 75 per cent of Canada’s canola crop could be processed domestically, Wood says. She explains that growing domestic demand for biofuel feedstock like canola oil is contributing to crush capacity expansion across the Prairies.

CCGA, the national policy voice for Canada’s 40,000 canola farmers, states that increasing trade volatility makes this expanding market critical for canola farmers.

“Growing usage and demand for our products here at home create more stability and help to de-risk our exports in a period of market uncertainty,” Wood says. “Creating more demand for canola oil here at home is strengthening canola prices, creating more market opportunities for farmers, and driving investment and jobs in rural communities.”

Tryhuk’s observed the trend to process more canola seed domestically relative to export shipments. He explains that Canada’s domestic processing industry is steadily increasing vertical integration and is building or expanding crushing capacity.

“I believe the ratio of crush to exports will continue to rise, in part to reduce the reliance on geopolitical or policy developments,” Tryhuk says.

Driedger adds that domestic processing has been huge for the industry: “The impacts of China not taking our seed would have been dramatically worse if we were only crushing the same volumes we did several years ago.”

Field of Dreams

Given ongoing growth in domestic processing capacity and the projected expansion of biofuel production in the U.S. and elsewhere, Driedger doesn’t anticipate canola will be in a position of overproduction any time soon.

Tryhuk adds that even if biofuel isn’t the solution to offset petroleum production, “the climate crisis horse has left the barn and nothing will stop it,” creating ever-increasing demand for biofuels, and, therefore, more demand for canola oil — even if its contribution to biofuels never exceeds its current market share.

He’s never considered canola to have reached a point of overproduction, and that comes down to growing consumption. Canada’s canola output jumped fivefold over the past 40 years, and yet, rising ending stocks didn’t keep the same pace.

An increasing world population should consume even greater production, and the signs already point to this increasing appetite.

Tryhuk explains that the number of days’ worth of supplies at crop year-ends is trending lower and is generally sufficient only to satisfy demand until new-crop supplies arrive 45 to 60 days later.

“This demonstrates to a large extent a Field of Dreams analogy: grow it, and the demand will come.” BF