Canola Price Surge

By Laura Smith
23^rd June 2025

Australian canola prices have experienced a significant surge over the past week due to a combination of factors driving the oilseed complex higher. During the first half of the year, oilseed prices remained subdued, largely due to uncertainty surrounding US biofuels policies, increased supply, and potential changes in demand.

In January 2025, US biofuel policies underwent changes through a mix of regulatory adjustments, tax credit transitions, and trade measures. The tax credit system in the US shifted from BTC Tax Credits to a Clean Fuel Production Credit (CFPC), which is based on carbon intensity. This shift disadvantages biofuels made from soybean and canola oil due to their relatively higher emissions scores. Markets have been closely monitoring the biofuels sector, which has been idling along with production. However, uncertainty around demand and profitability remains a major concern. Additionally, the Trump administration imposed import tariffs on China, Mexico, and Canada to bolster domestic soybean oil demand and limit cheaper alternatives from entering the US. As a result, under the new rules, Canadian oilseed is also less competitive in the US biofuel blending markets, potentially redirecting millions of Canadian oilseeds into the global food sector.

The recent conflict in the Middle East has been a significant driver of the increase in domestic canola prices, as rising Brent crude oil prices have had a ripple effect on the oilseed markets. Brent crude oil has reached five-month highs due to uncertainty around the safe passage of crude oil trade flows through the Strait of Hormuz, which accounts for 20% of global oil trades. Iran, one of the world's largest producers of urea and ammonia, has been forced to halt production at its plants due to escalating conflict, which will have serious price implications for Australian farmers.

Australian farmers will be closely monitoring cropping inputs in the coming months. The slow start to the cropping year, due to minimal rainfall and a delayed autumn break, combined with potentially increased fuel and fertilizer costs, is creating the perfect storm for market volatility and increased production risks.