Canola Watches CUSMA Talks

Why It Matters

A disruption to the U.S. market would jeopardize billions in revenue and strain the entire Canadian canola supply chain, from growers to processors.

Key Takeaways

• U.S. absorbs 78% of Canadian canola oil by 2025
• CUSMA review begins July 1, negotiations may be bilateral
• U.S. farm groups support renewal, but political risk remains
• Domestic biofuel demand lifts Canadian canola oil usage
• China shipments could rebound if diplomatic ties improve

Pulse Analysis

The Canadian canola sector has become increasingly tethered to its southern neighbor, with projections showing that 78 percent of oil exports will flow to the United States by 2025. In 2024, two‑thirds of canola meal also crossed the border, underscoring a supply chain that stretches from Western crushing plants to U.S. food manufacturers, biofuel refineries, and restaurants. The market’s value—$5.7 billion last year—means any policy shift reverberates through farm incomes, processing margins, and downstream pricing. As the joint review of the Canada‑U.S‑Mexico Agreement (CUSMA) approaches, stakeholders are scrutinizing how the next treaty iteration could reshape this trade artery.

Washington’s approach to the CUSMA review adds a layer of uncertainty. The U.S. Trade Representative has opened a first round of bilateral talks with Mexico, leaving Canada out of the initial discussions and hinting at a possible strategy of separate negotiations before reconciling them under the existing pact. Analysts warn that the United States could walk away entirely, a scenario that would invalidate the current framework and force Canadian exporters to seek alternative routes. Yet agricultural lobbies on both sides of the border are lobbying aggressively for continuity, emphasizing the mutual benefits of a stable canola corridor.

To hedge against potential disruption, Canada is expanding domestic demand and courting new export markets. Biofuel production has already lifted internal canola oil consumption from one million tonnes in 2021 to 1.6 million tonnes last year, a trend that could accelerate with supportive regulations. Meanwhile, diplomatic overtures toward China aim to revive shipments that fell from a peak of over a million tonnes to roughly 120,000 tonnes since 2022. Restoring that Asian outlet would diversify revenue streams and reduce reliance on a single market, strengthening the sector’s resilience amid trade‑policy turbulence.