Farmers on the Northern Plains are turning to canola as a strategic crop diversification play, driven by biofuel demand, improved local crush capacity and the desire to diversify marketing portfolios.
USDA forecast canola crush in 2025-26 will be up 6%, meaning a record production of canola oil and meal could be on the horizon. So, canola might be the next best bet to diversify crop portfolios in the years ahead.
Diversifying income with new crops
“For starters is the pressure that we’ve seen historically on spring wheat, which has brought back farmers pursuing other kinds of crops,” explained Bree Baatz, grain and oilseed analyst at Terrain. “Historical struggles especially on the export market, just given that the world has adequate supplies, has led farmers to consider other alternatives.”
Domestic crush capacity in the U.S. and Canada has accelerated the growth of vegetable oil feedstocks for biofuel production, Baatz said. This capacity has grown 28% since 2021, according to USDA.
“This is geographically unique to the Dakotas,” Baatz noted. “When you look at crush capacity, Cargill in Regina, Saskatchewan, just opened their new canola plant, and depending on their radius, being on the border of North Dakota could bring good local demand for canola.”
While the Northern Plains are no stranger to biofuels with the addition of soybean processing facilities, canola might provide even more opportunities in this space.
“A benefit of canola over soybeans is that 40% of their byproduct is vegetable oil that can go into both biofuel and food production,” Baatz explained. “Versus soybeans, only 20% of the byproduct is vegetable oil. So, if farmers grow canola supply, crushers should be happy to take it, looking to take advantage of biofuels’ demand for vegetable oil.”
A recent growth in Midwestern crush plants for canola seems to solidify the demand for canola in biofuels — and feed. The primary regions growing canola are the Northern Plains and Canada, but this is changing as well.
“There is an expansion happening with crop technology that makes canola better suited in dry and sunny regions, like we see in the Southern Plains,” Baatz said. “I would expect that trend is going to continue, where we’ll see the Southern Plains build out with more canola planting as seed technology advances.”
While many farmers worry about rising input costs — thanks partially to the conflict in Iran — canola might be a part of the long-term answer. Canola requires fewer inputs than corn, but slightly more than soybeans.
“It can be a lower-cost-to-produce crop, and then with this biofuels boost you can get from crushing, you’re going to get better crush margins, which could translate into better basis action with canola and less price volatility than export-tied soybeans and wheat,” Baatz explained. “As we see less demand for whole-bean exports, leaning into the biofuels is a great long-term strategy.”
Insulated from risk
Biofuels aside, more and more livestock feeds are utilizing canola. It is primarily used in hogs, dairy and poultry rations. Increased dairy feed demand is the primary driver for increased canola meal utilization in the U.S., and South Dakota has led the recent increase in dairy cattle, according to USDA.
These feed opportunities present a local feed market for canola meal use year-round, which is more good news for the profitability of crush plants. At the end of the day, for farmers, profitable crush plants keep crushing and keep buying canola.
“I think of it like I look at my 401(k),” Baatz said. “You’re supposed to be diversified. If you have at least five different revenue streams on your operation, you’re going to be more insulated. Growing crops that have different end users — not all relying on one trade partner — is a good risk diversification.”
As the concern of food insecurity grows with the conflict in Iran and global trade disputes, Baatz said it’s valuable for farmers to consider all options.
“Maybe this is an opportunity for farmers to revisit the mindset of near shoring and food production here at home instead of exporting whole grain products,” she said. “We’ve seen the implications of trade disputes and disruptions, and global shocks. I think now it’s fresh in everyone’s mind.”
Agronomic benefits of a new crop
When traditional crops become unprofitable, whether due to markets or conditions on the farm, considering an alternative option becomes important. Whether due to iron chlorosis or poor water drainage, new genetics within canola are finding success in fields where soybeans may struggle.
“Farmers need to evaluate which crop looks best based on market price,” explained Tim Swanson, agronomist with CHS. “They’ve got to be evaluating what contracting that crop will look like, because who knows where the market will be on the input side?”
Recent input price concerns have skyrocketed amid trade disputes and the conflict in the Middle East.
“Different crops require different fertility, different weed control,” Swanson said.
“Every crop needs sulfur and boron, and they all respond to it,” he added. “Canola is the high user of those two specifically, but don’t be afraid to push fertility to get a bigger crop.”
Swanson noted that other considerations to adding a new crop into the rotation revolve around management.
“What weeds do you have out there?” he said. “Are you able to get the chemical for that crop that you need to control those weeds? Are there herbicide-resistant weeds? Or opportunity for residuals?
“They need to look at what next year’s crop is going to look like through the chemicals and management that they’ll have to use, see how this rotation might impact their plan going forward.”
Whether that new crop you add into the rotation is canola or something else, Swanson said there are options.
“Wheat still has a play, and farmers want to plant it,” he explained. “Sugarbeets are always a priority in this part of the world, but corn and soybeans are definitely growing acres every year. Wheat is losing acres, though. Dry beans are still there. Canola seems to be moving outside of its traditional northern fields, too.”
With the Northern Plains’ ability to grow a wide variety of crops, market and global trade disruptions might make a new crop the star of the farm.