Canola prices decline amid new U.S.-Canada trade risks

Trade negotiations between Canada and the United States ended without an agreement, after which the U.S. reimposed 50% tariffs on some Canadian goods worth around $20 billion. In response, Canadian Prime Minister Mark Carney pledged to impose reciprocal tariffs on U.S. goods on a “dollar-for-dollar” basis.

The escalation in trade tensions has also increased pressure on Canada’s agricultural market. Traders are concerned that further expansion of restrictions could affect canola oil, which Canada supplies in significant volumes to the U.S. for biodiesel production. The U.S. market is one of the key destinations for products from Canada’s canola processing industry.

The canola market has already responded with losses. November futures in Winnipeg fell 2.6% on Friday to CAD 799/t, or around $579/t, and continued to decline on Monday, falling to CAD 787/t.

A further escalation of the trade conflict could negatively affect Canadian canola processing. If shipments of canola oil to the U.S. biodiesel industry decline, Canada could be forced to increase exports of canola seed instead of processing it domestically, adding more supply to the global market.

The situation is particularly important given Canada’s heavy dependence on the U.S. market, with around 72% of Canadian exports destined for the United States. Further trade tensions between the two countries could therefore continue to weigh on canola prices and alter the structure of Canadian oilseed exports.