Canola markets in the U.S. and Canada were strong 2023, and the outlook is looking robust for 2024 as well.
Commodity canola oil demand has also experienced steady growth over the last few years, with the last two being particularly strong in both the food oil and biofuels markets, reports Tom Hance, a representative of the U.S. Canola Association.
In 2023, there were record acres of U.S. canola production and increased imports of oil from Canada as well, for both food industry and biofuel uses.
“We are up over 2.3 million acres in the U.S. now, and it’s hard to say how much production will increase in 2024 and beyond, but we’ve seen modest but steady growth,” says Hance. “Planting of winter canola is growing in non-traditional regions such as the southern Great Plains, Pacific Northwest and southeast into winter wheat rotations and also into fallow ground. North Dakota
has most of the production, but Idaho, Montana and Washington are growing.”
The biggest driver of biofuel demand is the low-carbon fuel standard in California, where over 50% of the fuel is now bio-based. Hance notes that there is always uncertainty with potential change to the California standard, but at the same time, other states have also established these standards and more may follow.
At the national level, the Federal Renewable Fuel Standard for bio-based diesel helps grow the canola oil market, but Hance reports that its yearly requirement increases from 2023 to 2025 are not as aggressive as the industry would like.
“The increase for 2023 was less than what was produced for the year,” he says. “There is also a federal tax credit, which is undergoing a shift from a flat-rate per gallon to a value based on carbon intensity beginning in 2025. Details are to be determined, and how the carbon intensity of canola will be measured is also still to be determined.”
Canadian Canola Market
Canadian canola continues to be in strong demand, from the oil, to food products and biofuels. However, the Canadian canola industry has also very actively developed the market for canola meal for livestock and fish farming in North America and beyond. The meal contains large amounts of high-quality protein and is highly palatable for livestock. However, various food companies are also investigating how to fractionate the protein and develop different forms of it for inclusion in food products.
The Canola Council of Canada (CCC) reports that the dairy feed market in China for Canadian canola meal is poised for significant growth. Current use of Canadian canola meal in Chinese carp and tilapia farming is also strong, but growth is expected in that market as well. Shipments to that market started picking up about 10 years ago, and have risen every year. In 2023, that export market reached 1.8 million tonnes. Growth in demand for canola meal is also expected in the Thai and Vietnamese aquaculture markets.
Historically, roughly half of Canada’s canola seed, about 600,000 tonnes on average each year, has been crushed in Canada and half has been exported for crushing to the U.S., China, Mexico, Japan and a few other countries, according to the CCC.
However, over the next two years, Canada’s domestic crushing capacity will vastly increase, causing seed exports to drop substantially, due to the construction of new crushing plants. Four plants are being built by Viterra, Cargill and Ceres Global Ag Corp and Federated Co-operatives in the province of Saskatchewan and one may begin operation as soon as early 2024.
The canola oil produced at these crushing plants will be used mainly to manufacture biodiesel with the rest going to the food industry. The approximately four million tonnes of canola meal that will be produced at the new plants when they reach full capacity will go into livestock feed and aquafeed markets being continually developed by the CCC.
While acreage is not expected to grow much in Canada due to these new plants, production of seed currently sits at approximately 20 million tonnes per year. Looking at production trends, canola yields have doubled in the last 20 years and the CCC reports that by 2025, they’re targeting increased yield to reach 26 million tonnes per year (52 bushels/acre at 22.7 kg/bu).
