U.S. threatening Canada’s canola oil industry

Glacier Farm Media | MarketsFarm – Canada’s canola oil industry is facing two threats from the United States, said Chris Vervaet, executive director of the Winnipeg-based Canadian Oilseed Processors Association.

Currently, the largest threats emanating out of the U.S. are the recent changes to the biofuel tax credits and the possibility of the Trump administration imposing a 25 per cent tariff on all goods the U.S. imports from Canada. Besides those, Vervaet warned that China has often been overlooked as a threat to Canada’s biofuel industry.

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As for the most immediate challenge, Vervaet stressed that in recent years the U.S. has become Canada’s most important foreign customer for canola oil and meal.

The latest data from the Canadian International Merchandise Trade Database shows the U.S. accounting for 96.2 per cent of Canada’s canola exports at 3.14 million tonnes during the first 11 months of 2024. The December figures are not yet available.

For canola meal, the U.S. is also Canada’s top foreign customer at 3.44 million tonnes during the same period, which are 65.5 per cent of 2024 exports. In terms of canola seed, the U.S. is fifth at more than 271,000 tonnes.

“A tariff is going to have a significant impact on our industry,” he stated. “There are some interesting dynamics for sure in the United States. All (COPA) can really comment on is we will wait to see what approach the new administration takes towards biofuels.”

“In recent years almost all of the canola oil exports have gone to the United States. That’s primarily driven by the growth of the renewable fuels market in the United States, most notably that canola, was after many years, finally able to be an approved feedstock for renewable diesel production,” he continued.

That important change to Section 45Z of the Inflation Reduction Act was made by the U.S. government in 2023. However, earlier this January revisions to 45Z made by the U.S. agriculture and treasury departments excluded canola when a new carbon intensity score was added.

While canola’s inclusion has been good news, Vervaet added, “the not so good news story is that to qualify and to actually take advantage of (45Z) you have to have as a feedstock provider a carbon intensity score below a certain threshold. That threshold is going to be a challenge for canola to meet. Our carbon intensity based on the assumptions and the model being used puts us at a score that’s simply too high.”

Vervaet added that U.S. President Donald Trump is likely have some kind of new tax policy when it comes to biofuels. However, reports indicated there’s the chance of the biofuel tax credits being eliminated. The incoming Secretary of Agriculture, Brooke Rollins, along with the next Secretary of Energy, Chris Wright, and the new head of the Environmental Protection Agency, Lee Zeldin, have notable track records favouring fossil fuels over biofuels.

However, Vervaet said there are domestic opportunities for canola and its oil – something which the industry has been wanting to expand.

Reports indicated the domestic crush could be expanded to as much as 17 million tonnes per year from the current capacity of 11 million.

While the Trump tariff threat led Federated Co-op to put its canola expansion plans with AGT for Regina on hold, Vervaet pointed to another problem.

“There’s potentially a lot of Chinese used cooking oil that is finding its way into the Canadian biofuel market indirectly. That’s another big factor that’s sometimes gets lost in the shuffle in terms of demand erosion for canola over the short and medium term,” he stated.