Research

Fueling the future: How the new biofuel demand wave could reshape Australia’s canola sector

2 April 2026 12:12 RaboResearch

Shifting global regulations and rising Asia‑Pacific demand are redefining vegetable‑oil markets for the decade ahead.

truck and canola field

Rising biofuel demand may position canola for potential growth

    What this means for grain producers: Transport fuel demand has remained resilient in recent years, with EV sales largely confined to passenger vehicles and therefore having limited impact on diesel and jet fuel use. As biofuels are increasingly considered among the solutions for hard‑to‑abate transport sectors, canola’s role in energy markets could rise. This could contribute to a more diversified demand base for canola, which may support longer‑term price resilience relative to scenarios without additional biofuel demand, and may influence its role in crop rotations as Australia seeks to capture more value from the energy transition. How grain traders can benefit: Australia currently exports more than six million tonnes of canola seed each year – equivalent to over two billion litres of renewable diesel – while Australia and New Zealand together import more than 36 billion litres of diesel annually. This imbalance highlights a potential opportunity to add value to Australian supply chains. As Asia‑Pacific biofuel capacity expands and European rules tighten on crop‑based fuels, trade flows may pivot from seed toward oil, increasing the importance of traceability and consistent feedstock supply to emerging fuel markets. What can change for canola crushers: Against the backdrop of a global biofuel surge and rapidly expanding Asia‑Pacific refining capacity, the relative value and importance of canola oil – rather than seed – is increasing in global markets. This shift could strengthen the underlying economics of canola crushing, as demand increasingly favours processed oil over raw exports. A more consistent pull for vegetable oil may support improved crushing margins and asset utilisation in some market conditions, though outcomes will depend on seed costs, energy prices, logistics, policy settings and by‑product values. What is next for fuel producers: While EV uptake is reshaping petrol demand, diesel and jet fuel are projected in several outlooks to remain comparatively resilient. Canola oil aligns well with a rising Asia‑Pacific biofuel industry, and Australia’s geographical proximity may reduce freight time/costs relative to some origins, such as Western Hemisphere suppliers of vegetable oil. As regional mandates, blending targets and carbon frameworks evolve, market participants with secured supply may be less exposed to certain market disruptions, although they remain subject to price, policy, certification and counterparty risks. Middle East conflict has potential implications for biofuel markets: Reduced energy exports from Persian Gulf countries caused by the current conflict have sharpened attention on energy security and the reliance on imported liquid fuels. While impacts are still emerging, such conditions reinforce policy support for alternative fuels, potentially accelerating biofuel policy implementation and investment in lagging markets such as Australia and New Zealand.

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