The U.S. Department of Agriculture addressed concerns in the Canadian canola market about the Chinese tariffs in its recent World Agricultural Supply and Demand Estimates report, but the overall global situation for oilseeds remained largely unchanged.
The positive news from the report was that the outlook for the global vegetable oil demand remains strong for the 2025-26 crop year.
Total vegetable oil demand is expected to increase by 6.9 million tonnes from last year to a record 316 million tonnes.
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Although the demand estimate was lower than the August forecast, the point remains that global vegetable oil demand is continuing to increase. That remains a positive backdrop to what has been a challenging environment for Canadian canola during the last month.
The USDA dropped global vegetable oil exports by 417,000 tonnes to 86.7 million tonnes.
The major vegetable oils showed a significant change in exports with palm oil dropping and soybean oil exports increasing from last month.
The current prices for soybean oil in the international market are driving demand, even though nearby futures remain close to the 53 cent per pound level.
The strong soybean oil demand will support canola and canola oil markets in the coming months. Canola futures have rallied off of the recent lows and should continue to move higher after harvest pressure wanes in the coming weeks.
In the WASDE report, USDA responded to the Chinese tariff situation but also included some bearish global rapeseed production estimates.
Production increased by 1.4 million tonnes to 91 million tonnes, with the main increase in canola output coming from Canada, which was increased by 750,000 tonnes to 20 million tonnes.
Output was also increased in Australia, Kazakhstan and Russia.
This increase in global stocks spilled over into the rapeseed ending stocks estimate, which rose by 1.51 million tonnes.
This pushed the ending stocks-to-use ratio (expressed to days of use) to 38.8 days, which is the highest since the 2023-24 crop year.
The increase in the global ending stocks is due mostly to a 1.34 million tonne rise in Canadian ending stocks to 2.95 million tonnes.
Agriculture Canada is currently forecasting canola ending stocks at 2.2 million tonnes.
The USDA also forecast a drop of canola exports by 900,000 tonnes to 6.7 million tonnes, which is slightly below the current Agriculture Canada forecast of seven million tonnes.
These estimates should not come as a surprise to the canola market because they are largely within the range of the current industry consensus.
The USDA report was certainly negative for rapeseed (canola), but the overall structure of the vegetable oil trade was left unchanged.
The strong soybean oil prices are likely to continue in the coming months, despite large production this year in the United States and Brazil. This is positive for canola markets in the coming months.
