Rapeseed and canola markets await US imposition of 25% tariff on Canada

The markets for rapeseed, canola, and other oilseeds remain uncertain due to the possible introduction of import duties in the US on goods from Canada and Mexico.

February rapeseed futures closed yesterday, and traders switched to trading May contracts. As a result, February futures fell by €31/t to €477.25/t, while May futures rose by €4.25/t to €516.75/t or $536.8/t.

 

Before the weekend, Trump announced his intention to impose a 25% tariff on imports from Canada and Mexico starting in February. Analysts believe that markets have not yet factored this into canola prices, but if the tariff is implemented, the consequences will be very severe.

 

The U.S. has recently become a key market for Canadian canola and meal, so the imposition of a tariff would complicate the situation for canola producers and processors in Canada, the Canadian Oilseed Processors Association said. The biggest threat, they see, is recent changes to tax breaks for the U.S. biofuels industry, as well as plans to impose a 25% tariff on Canadian goods.

 

In the first 11 months of 2024, the United States purchased 96.2% of all canola exports from Canada, which amounted to 3.14 million tons, and 65.5% of Canadian rapeseed meal (3.44 million tons). In addition, Canada exports 90% of its canola oil to the United States.

 

March canola futures on the Winnipeg Exchange rose 0.5% yesterday to CAD 640/t or $442/t (+3.9% month-on-month), although the market had expected prices to decline.

If canola prices fall in Canada, farmers will switch to growing other crops, which will keep prices high.

The average price of canola in Canada in the 2023/24 MY was 695 CAD/t, in the 2024/25 MY it is at 645 CAD/t, and next season it may drop to 600 CAD/t, while the 5-year average is 690 CAD/t.

Lower canola prices will increase pressure on canola prices in Europe, an important market for Canadian canola, especially against the backdrop of reduced demand from the US and China, which is holding back purchases in anticipation of lower prices.