Grain and Oilseeds: 2026 FCC Food and Beverage Report

The following information is from the 2026 FCC Food and Beverage Report, which highlights the opportunities and challenges for Canadian food manufacturers by sector. To get the big picture, read the full report.

Improved market certainty supports demand for the next year

The grain and oilseed milling sector includes establishments engaged in milling grains and crushing oilseeds, refining and blending fats and oils, and manufacturing cereal products. The sector spans flour, rice and malt milling, wet corn milling and oilseed crushing, supplying key inputs to food, feed, fuel and industrial markets.

Grain and oilseed milling: 2026 sales forecast

Sales for the grain and oilseed milling sector were uneven in 2025, reflecting the impacts of elevated Chinese tariffs that weighed heavily on the starch and vegetable fat and oil manufacturing sub-sector. As a result, volumes (that is, sales adjusted for inflation) fell 4.8% year over year. While grain milling sales rose 12.4%, they were insufficient to offset the 2.2% sales decline in starch and vegetable fat and oil manufacturing, given the latter sub-sector’s outsized share of total sales. Overall, sector sales fell 2.5% in 2025 (Figure 2.1).

Figure 2.1: Grain and oilseed milling sales fell in 2025 due to lower volumes

Total sales and volumes (in $, billions) are on the vertical axis and shown by the height of each bar. The number above each bar is the year-over-year growth as a percent. Volumes are sales deflated by a price index (January 2020 = 100).

Sources: FCC Economics, Statistics Canada

However, conditions improved as the year progressed. By the fourth quarter of 2025, starch and vegetable fat and oil manufacturing began to recover, with sales up 10.7%, while volumes increased more modestly at 2.8% compared to the same period in 2024. Canola meal exports increasingly found new markets outside of China as the year advanced, though at lower prices than in 2024, while canola oil prices strengthened but volumes remained constrained. In contrast, soybean oil and meal exports remained strong in both sales and volume. Grain milling sales were also resilient throughout the year, supported by wheat milling volumes above the five-year average, which helped offset softer selling prices and provided additional support to overall sector sales.

Looking ahead, the outlook for 2026 shows a rebound in both sales and volumes. Favourable biofuel and trade developments announced early in 2026 are improving demand prospects and providing greater certainty for processors. Sales are forecast to increase 7.8%. While geopolitical risks remain, the sector enters 2026 with considerably more certainty for sales than it faced entering 2025.

Ingredient insights: Canola

Canola is the most important input for the grain and oilseed milling sector, accounting for roughly 40% of total input costs by value. Entering the 2025 calendar year, stocks were tight following a smaller 2024 harvest, creating supply constraints that pushed prices higher. Canola prices rose above 2024 levels through the first three quarters of 2025 before easing in the fourth quarter.

This picture shifted quickly once the 2025 harvest was complete. Domestic production typically supplies nearly all canola used by crushers, and 2025 was no exception. Canada imported only 0.34 million metric tonnes of seed in 2025 while crushing approximately 11.5 million metric tonnes. As a result, Canadian production is the primary driver of both availability and pricing for processors.

Canadian canola production reached a record 21.8 million metric tonnes in 2025, supported by strong yields. The surge in supply lifted December ending stocks and marked a clear transition from tight to more abundant inventories (Figure 2.2). As stocks rebuilt, prices softened late in 2025. Large carryover stocks are expected to keep prices under pressure in 2026, providing crushers with some relief on input costs.

That said, input costs remain sensitive to production outcomes. A challenging 2026 harvest could quickly tighten supplies and alter price trajectories in the latter half of the year. Export performance will also remain a key variable influencing how quickly excess stocks are drawn down. For more detail, see FCC’s 2026 crop outlook.

Figure 2.2: Canadian canola stocks rise after record 2025 harvest

Sources: Statistics Canada, FCC Economics

Grain and oilseed milling: 2026 margin forecast

Margin growth in the grain and oilseed milling sector moderated slightly to 1.2% in 2025, albeit extending steady expansion for a fourth consecutive year (Figure 2.3). Weaker sales growth constrained margins relative to recent years, but lower costs of goods sold were sufficient to keep margins positive overall. Margin pressures were most evident in oilseed processing, where lower export pricing for canola meal and soybean meal weighed on returns. In flour milling, slightly lower selling prices were largely offset by larger volumes, limiting the impact on profitability.

Figure 2.3: Grain and oilseed milling margins increase again in 2026

Sources: FCC Economics, Statistics Canada

Margins are forecast to strengthen in 2026, with the gross margin index expected to rise by 5.0%. This improvement reflects a combination of higher sales volumes, more favourable export demand, and lower grain and oilseed input costs supported by ample supplies. While geopolitical and production risks remain, which could affect both demand and input availability, the margin outlook entering 2026 is notably stronger than a year earlier.

Other trends to monitor in 2026

• Downstream demand for flour products by the bakery and tortilla manufacturing sector has softened as evidenced by lower sales, with consumer purchasing patterns continuing to shift. Sustained weakness in this segment could weigh on or shift flour demand.

• China’s reduced tariff on canola meal extends only until the end of 2026. Expect another announcement before the end of 2026.

• China’s reduced tariff on canola seed could put modest upward pressure on input costs for crushers.

• Expansion of domestic crushing capacity is expected to increase Canada’s total oilseed crushing capacity to 15 million metric tonnes in 2026 according to the Canadian Oilseed Processors Association.

Biofuel feedstock demand update

Biofuel policy is notoriously complicated, yet it plays a critical role in shaping oilseed trade flows and price dynamics. U.S. biofuel policy has become a key driver of demand for Canadian oilseed products in recent years, particularly canola oil. As highlighted in last year’s Food and Beverage Report, U.S. imports of biofuel feedstocks from Canada rose sharply over the past five years, underscoring how policy decisions can quickly reshape markets.

When canola oil became an eligible feedstock under U.S. biofuel tax credits in 2023, exports of canola oil from Canada increased 40%. Since then, policy decisions continue to have an impact. Uncertainty surrounding eligibility rules for the Clean Fuel Production Credit (45Z) in 2025 weighed heavily on the sector. Early in 2025, biodiesel and renewable diesel production declined in the U.S., pulling total biofuel feedstock use down sharply. As of November 2025, total feedstock usage was down 12% for the year compared to the same period in 2024. Canola oil feedstocks had the most rapid decline, down 45% (Figure 2.4). For Canada, this meant canola oil demand from the U.S. for biofuels fell at the same time that China imposed a 100% tariff rate on canola oil, dealing a double blow to the sector. Exports of canola oil to the U.S. declined 25% in 2025, sitting at the lowest level since it became an eligible feedstock in 2023.

Figure 2.4: Policy uncertainty led to declining biofuel feedstock demand in the U.S.

Source: U.S. Energy Information Administration

However, greater clarity did arrive in early 2026, which is expected to increase the demand for Canadian canola and soybean oil feedstocks. First, the confirmation that the 45Z credit, which offers production tax incentives for U.S.-produced biofuels, will apply through 2029 creates more certainty for the biofuel industry in the U.S. to invest and expand, meaning more demand for feedstocks. Second, the exclusion of non-North American used cooking oil and animal fats means less competition and more demand for other feedstocks to fill the gap. While questions remain around future Renewable Identification Number (RIN) treatment for imported feedstocks and Renewable Volume Obligations (that is, the amount of biofuel that must be blended into the nation’s fuel mix), current rules are expected to shift feedstock demand toward North American sources, positioning Canadian oilseed crushers to benefit. This is important for the sector as crushers manage an abundance of raw material thanks to record canola production in 2025.