Tariffs could drop Canadian canola acres

Protectionist trade actions in two key export markets will likely influence farmers’ seeding plans, says an analyst.

China announced March 8 that it will be slapping 100 per cent tariffs on Canadian canola oil and meal and peas effective March 20.

That comes on the heels of U.S. president Donald Trump announcing that his 25 per cent tariff on a wide variety of Canadian commodities will be back in full force April 2. Those full tariffs were briefly in play March 4-6 before goods claimed under the Canada-U.S.-Mexico Agreement got an exemption.

MarketsFarm analyst Bruce Burnett said the proposed tariffs will factor into seeding plans, but it’s not the primary consideration.

“Rotation rules for the most part,” he said.

He thinks the threat of tariffs may help convince farmers to plant less canola and more barley, wheat and durum, but he doesn’t anticipate a massive shift.

“None of these crops are pricing really well because of the fact that input costs remain high,” said Burnett.

“It’s not like there’s a magic commodity that you can switch to that would be instantly profitable if you’re trying to replace your canola acreage.”

He thinks farmers might shrink their canola plantings by 500,000 to one million acres. Nearby canola futures fell $40 per tonne, or $1 per bushel, between the close on March 7 and mid-day on March 10.

The United States is the top market for Canadian canola, mostly in the form of oil and meal.

Total export value to that market in 2024 was $7.7 billion with 3.3 million tonnes of canola oil and 3.8 million tonnes of meal moving south of the border.

China is also a major player with $5 billion in total imports that year, including two million tonnes of canola meal, valued at $921 million, and 644 tonnes of canola oil, valued at $1.5 million. Canadian agriculture was already watching warily after China announced an anti-dumping investigation into Canadian canola last year.

Canada’s cereal crops are nowhere near as dependent on the two markets.

Mercantile Consulting Venture noted in a recent analysis that it conducted for the Saskatchewan Wheat Development Commission that the U.S. typically accounts for about seven per cent of Canada’s non-durum wheat exports, or about 1.2 million tonnes per year.

Mercantile expects that Trump’s looming tariffs would cause Canadian spring wheat values to fall. That, combined with a lower Canadian dollar, should allow Canada to take some market share away from the U.S. in other markets.

The U.S. accounts for about 12 per cent of Canada’s durum exports, or about 500,000 tonnes per year.

Mercantile expects U.S. imports of Canadian durum will be heavily rationed.

“U.S. buying will likely be more hand to mouth as they only import the minimum volume needed until either tariffs go away or new crop replenishes supplies,” the firm stated in its SaskWheat article.

Burnett said barley is going to be an interesting one to follow.

“We do export a significant amount of malt and malting barley to the U.S.,” he said.

The U.S. may have to turn to alternative suppliers. The obvious first choice would be Mexico, but Mexico is in the same tariff boat as Canada.

That leaves the European Union and Australia, which have a significant transportation disadvantage.

The other factor to consider is Canada’s counter-tariffs. U.S. corn is on the list of Canada’s retaliation targets, which would support Canadian barley prices.

“In the last few years, it has been the corn price that has been the anchor for the barley price rather than just the broad demand for (barley) domestically,” said Burnett.

The U.S. is a “captive market” for Canadian oats because there are no real viable alternatives.

He thinks U.S. oat buyers are going to be forced to pay the higher price because it is doubtful that growers in the Dakotas are going to plant more oats when they can grow corn and soybeans instead.

Pulse crops are unlikely to be heavily influenced by the U.S. tariffs because it is not a big market for Canadian peas or lentils.

But China is a huge market for yellow peas, averaging 1.5 million tonnes of imports worth $740 million annually over the past five years.

He expects China’s tariffs would lead to fewer peas and more lentils, chickpeas and beans.

The good news for peas is that India is extending the free import of yellow peas by three months through May 31, 2025.

Tags: canola, Canada, canola oil, canola meal, markets, Mexico, peas, tariffs, China, export, price