Palm oil imports continue to tumble in the European Union.
The U.S. Department of Agriculture’s Foreign Agriculture Service (FAS) is forecasting that the region will buy 2.6 million tonnes of the commodity in 2026-27.
That would be the seventh consecutive year of declining imports, falling from 7.11 million tonnes in 2019-2020.
The cuts are due to lower use by the food, feed and biofuel sectors.
“Consumer concerns about environmental and health impacts have reduced demand for palm oil in food products,” stated the report.
“In addition, the European Commission classifies palm oil products as high risk for ILUC (indirect land use change), which limits its use as a feedstock for biofuels.”
Rapeseed/canola oil has been one of the beneficiaries of the reduction in palm oil use.
“Restrictions on palm oil use in biofuels and ongoing EU discussion regarding sustainability requirements affecting other vegetable oils continue to influence the feedstock mix used in biodiesel production, reinforcing the importance of rapeseed oil in the EU market,” stated the FAS report.
Why it Matters: Canada is keen on diversifying away from the Chinese market for canola.
Neil Townsend, chief market analyst with GrainFox, said canola oil-based biodiesel already had a leg up over palm oil-based biodiesel because it works better in cold temperatures in the northern EU states.
As well, rapeseed is grown in EU member states such as France, Germany, Poland and Romania, so there is a vested interest in using the crop.
“Canola oil has a natural advantage,” he said.
The FAS is forecasting 5.8 million tonnes of canola imports in 2026-27, which would be identical to the current campaign but well below the 7.96 million tonnes imported in 2024-25, which was necessary to make up for the EU’s short crop that year.
Australia supplied 46 per cent of total imports in 2024-25, followed by Ukraine with 34 per cent and Canada with 14 per cent.
Trade data show that Ukraine and Canada significantly expanded their presence in the EU during the early months of 2025-26.
The FAS said the EU Deforestation Regulation (EUDR) is another potential factor that will limit palm oil use in the region.
The regulation, which is scheduled to come into force in December, establishes rules for commodities identified as the main drivers of deforestation: cattle, cocoa, coffee, palm oil, rubber, soybeans and wood.
“Palm oil producers and EU importers are concerned regarding geolocation and traceability elements of the EUDR, in particular for palm oil shipments sourced from small plots that are aggregated and transported in bulk,” stated the FAS.
The FAS anticipates that a portion of the palm oil supply will comply with the EUDR, but the volume will be limited and costly.
“While the EUDR is projected to have a negative effect on EU palm oil use and imports in 2026 and 2027, significant reductions have already occurred by an earlier phase-out by the food, feed and biofuel sector,” stated the report.
Consumers are concerned about its high saturated fat content and perceived risk of tropical deforestation. Many brands in the EU have started using “palm oil-free” labels as a major marketing tool.
There have also been some price considerations.
“Since 2024, palm oil prices have risen significantly and, while generally still the lowest price option, palm oil has lost its substantial competitiveness with other vegetable oils,” stated the FAS report.
That is why it has been partially replaced by corn oil in compound feed formulations. The FAS is forecasting that 70,000 tonnes of palm oil will be used for feed in 2027, down from 100,000 tonnes in 2025.
Industrial use will fall to 1.01 million tonnes from 1.12 million tonnes over that same timeframe, while biofuel use will drop to 85,000 tonnes from 120,000 tonnes.
