The ongoing trade dispute between the US and Canada is set to drive further volatility in the Canadian wheat market, with farmers and exporters having to adjust to higher costs and shifting trade flows.
Following a monthlong pause on US tariffs on Canada and Mexico, President Donald Trump officially levied 25% tariffs on the two countries on March 4. However, after facing a 25% retaliatory tariff from Canada and engaging in multiple negotiations with both countries’ leaders, some tariffs were put on an extended pause, now reportedly until April 2.
Varied prices confuse market participants
The immediate effects of these developments have led to broader price disparities and inconsistent offers for Canadian Western Red Spring (CWRS) wheat. Demand remains low, and producers hesitate to sell amid weakening prices and rising origination costs. Selling activity has slowed, as a result, with available stocks becoming more competitively priced. Those in need of replacement stocks are subject to offer up to 15 cents per bushel higher than those with stock.
“The market is disjointed right now,” said one Canadian wheat trader, “there’s a clear divide between those who have wheat and those who don’t and have to buy at a premium.”
Tariffs have led to significant price volatility in the past few weeks. While some sellers offer discounted rates to move inventory, others are holding out, hoping for a market rebound. Logistical challenges, such as vessel congestion and limited farmer selling, further complicate market dynamics.
“Some of these offers are ridiculously low,” said another trader. “With farmers not selling and vessels bunching up, the economics of these trades don’t make sense.”
Market adjusts in response
With tariffs affecting North American trade, exporters are shifting focus to alternative markets, particularly in the Middle East and Southeast Asia. However, strong competition from other wheat-producing regions complicates these efforts. Rising costs for fertilizers, machinery, and transportation are further weighing on the industry, reducing producer profit margins.
Farmers are also facing rising uncertainty as prices fluctuate. “Prices went down at first, but they’ve come back up a bit,” said one wheat producer, who expects the market to eventually stabilize on its own. The outcome of the upcoming planting season in May will play a significant role in pricing. “If we have a good harvest, prices will drop even further, and tariffs will only make it worse,” the producer noted. Conversely, if growing conditions are poor, a limited supply may lift prices regardless of trade policies.
Given the limited global competition for red spring wheat, many producers are opting to “wait it out” in hopes of a more favorable market, with some still holding onto approximately 25% of last year’s production.
As tensions between the US and Canada persist, Canadian wheat prices are expected to remain volatile. Market participants are closely monitoring policy developments, anticipating further disruptions if trade relations do not improve. Without a clear resolution, price swings and supply chain disruptions are likely to continue, making strategic market positioning essential for producers and buyers in the coming months.
