Why Is Food Demand For Canola Down In 2025?

Food demand for canola oil is down in 2025.  

MAHA didn’t do it. 

Jan 1 Marked A Big Transition

Its common knowledge that biofuel demand for Canola Oil is off hard this year.  This coming from the expiration of the $1/gallon Blenders Tax Credit and a weak 2025 Biobased Diesel mandate thanks to the prior administration.

But what isn’t as well publicized is that food demand for Canola Oil is off too, by about 4%.  Getting at this number requires making some leaps with the data.  Its implied based off production, imports, exports, and biofuel use which is all reported monthly.  Inventory gyrations make it a little squishy, but it looks to be down about 4% Jan-May vs Sep-Dec 24.  And its not a seasonality issue.  Any way you look at YOY changes, Canola Oil food demand is off 3-5%.

At first glance, one would think the loss of biofuel demand would push canola oil into food oil.  But in the USA that hasn’t happened yet.

There’s a straightforward reason why, and that has some implications for the balance of 2025 and into 2026.

Soy Won The Price Race To The Bottom

As we moved into Q4 2024, US Soybean Oil futures got to work finding new markets.  

In the USA it captured all the food demand it could.  

Look at this chart from a prior post to see how other oil supplies slowed.

Palm oil imports alone dropped ~400 mil lbs Oct-Mar.  This was soy buying back food and animal feed market share.  

But that wasn’t enough.  Next soy tackled the export market.

Faced with competition like this, its no wonder Canola Oil has yet to find its footing.

But times are changing.  

US Soybean Oil is getting expensive, pricing itself out of exports.  With that the door is opening for Canola to start reaching into the food space again.  By the end of 2026 Canola could get back the share its lost.  

Price signals work.

Biofuel Policy Will Drive 2026 Arbitrage Plays

Will the EPA finalize the 50% RIN generation reduction for biofuels made from imported feedstocks?

Will SRE’s pull the teeth out of the 2026 mandated volumes?

These questions will determine the need for Canola Oil to move in style into US food supply chains next year.

And these questions don’t yet have answers.

The important point for today is there is no serious barrier to shifting food and feed demand into Canola should it be required.  

Via price, soy took massive domestic food share from Palm and Canola the last 8 months.  It did the same in the export market, especially taking share from Palm into India.

If biofuel policy pulls disproportionately on soybean oil supplies driving up its price, canola will find a way to step into the void.

Happy Trading.