Far East Becomes a Favorable Market for Canadian Rapeseeds
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In nine of the last 15 years, Canada’s Rapeseed Oil extraction rate has equaled or exceeded the average Rapeseed Oil extraction range of 0.33 to 0.44 used by USDA officials. The frequency of such occurrences and continual advancements in Rapeseed seed genomics are justifications for revising at least the upper limit of the range. Low Oil content in the past two years has driven Oil extraction rates down to 0.418 in MY 2021/22 and 0.415 in MY 2022/23 year-to-date. These rates are well below the three-year (2018 to 2020) average of 0.436.
In Canada, Rapeseed crush margins have experienced significant volatility since 2020. ICE Commodities, which calculates a proxy Rapeseed crush margin based on soybean Oil and meal futures (there is no the futures market for Rapeseed products) reported a record-low crush margin in October 2021 and began breaking new record highs in November 2022. March crush margins have since moved even higher in March 2023.
In MY 2023/24, assuming the Rapeseed Oil extraction rate rebounds to a five-year (MY 2018/19 to MY 2022/23) average rate of 0.428, FAS Ottawa projects Canadian crushers to produce 30 percent more Rapeseed Oil year-over-year from 18.3 million MT of Rapeseed.
Rapeseed crush capacity is expected to grow from 11.3 million MT in 2022 to 17 million MT in 2025, according to a series of industry announcements. These announcements came with several statements for new and expanded renewable diesel plants in Canada and the United States. Industry states that major crush capacity expansion plans are on track.
If current plans for increased crush capacity materialize, the share of seed processed domestically in a historically average growing year could approach 75 percent to meet growing industrial demand in the United States and Canada. In the absence of stronger market signals for renewable diesel production in Canada, the increase in crush capacity will serve foreign vegetable Oil demand and will likely lead to a significant increase in Rapeseed Oil exports to the United States by 2025. The industry calls on the Canadian Government to a renewable fuel incentive program similar to what the United States has in its Inflation Reduction Act.
Canadian Rapeseed growers and processors welcomed the U.S. Environmental Protection Agency’s (EPA) December 1, 2022, determination to approve Renewable Fuel Standard (RFS) pathways for certain biofuels that are produced from Rapeseed/Rapeseed Oil. With this action these fuel pathways will be eligible to generate Renewable Identification Numbers (RINs), provided they satisfy the other definitional and RIN generation criteria for renewable fuel specified in the RFS regulations. In conjunction with the market signal triggered by the U.S. Inflation Reduction Act, and state-level initiatives like those in place in California and Oregon, the announcement signifies a potential increase in the exports of Canadian Rapeseed Oil to U.S. renewable diesel facilities.
Separately, EPA’s proposed RFS volume and percentage standards, published in December, 2022 for 2023, 2024, and 2024 drew disapproving comments from Canadian industry. Canadian producer associations stated that the EPA should update its analysis behind proposed renewable volume obligations (RVOs) “to account for the approval of Rapeseed Oil as a feedstock in [renewable diesel/ sustainable aviation fuel] production and the expectation that imports from Canada will occur to satisfy this growing demand.” U.S. Rapeseed production remains limited outside of the northern plains (mainly North Dakota) by climate and soil factors. The bulk of Rapeseed Oil feedstock used in U.S. renewable diesel production will likely come from Canada.
Rapeseed and Rapeseed Oil Export in Canada
According to AgFlow data, Canada exported 2.8 million tons of Rapeseed in Jan-June 2023. In June, Mexico led its export market with 78,000 tons, followed by China (60,000 tons), Japan (14,970 tons), and Singapore (10,000 tons). In MY 2023/2024, Canada is forecast to export 3,040,000 tons of Rapeseed Oil. MY 2022/2023 Rapeseed Oil export estimate is 2,900,000 tons.
Other sources: USDA
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