The recent tumble in rapeseed and canola prices, ranging from 3.5% to 7.3%, has been driven by China's announcement of an anti-dumping investigation into Canadian canola and chemical products. This move came in retaliation to new tariffs imposed by Canada on imports of electric vehicles (EVs), steel, and aluminum from China, which follow similar actions by the U.S. and the European Union earlier in 2023.

Impact of China's Investigation and Global Tariff Policies

China's Ministry of Commerce highlighted that in 2023, canola imports from Canada surged by 170%, with total imports from January to July 2024 reaching 2.65 million tons, valued at $1.44 billion. China claims that Canada is selling canola at below-cost prices, harming domestic farmers, and is preparing to take the issue to the World Trade Organization (WTO). This dispute comes after Canada introduced a 100% tariff on Chinese EVs, effective from October 1, and a 25% tariff on Chinese steel and aluminum products starting on October 15. These tariffs mirror similar moves by the U.S. and EU to restrict Chinese imports of EVs and other goods.

Price Fluctuations in Canola and Rapeseed Futures

Despite the initial drop, both canola and rapeseed prices recovered later in the trading session. On the Winnipeg exchange, November canola futures fell by 7.3% early in the day but later rebounded to CAD591 per ton ($436), marking a 4% decline for the day, 1.3% for the week, and 3.2% for the month. Similarly, on the Paris exchange, November rapeseed futures dropped by €18.5 per ton before recovering to €469.75 per ton ($519.3), resulting in only a slight 0.3% decline for the day, with weekly gains of 1.3%.

Factors Influencing the Global Market Outlook

Several factors are influencing the global rapeseed and canola market. A key driver is the forecasted decline in EU rapeseed production, which is expected to fall to between 16.9 and 18 million tons. This shortfall will likely increase EU rapeseed imports by 2 to 3 million tons, creating an opportunity for Canadian canola to find new buyers in Europe if China reduces its imports.

China's limited ability to replace Canadian canola with alternative sources will likely result in increased imports of vegetable oils, particularly as sunflower oil production is also declining. This could push up global vegetable oil prices, increasing costs for Chinese importers.

The Ukrainian Market and Weather-Related Challenges

Meanwhile, Ukraine's rapeseed market faces its own challenges. As of early September, 446,000 hectares of winter rapeseed had been sown, down from 665,000 hectares the previous year. The lack of rainfall in August and early September has delayed sowing, with dry conditions expected to persist for another 10-14 days. This could reduce Ukraine's harvest for the 2025/26 marketing year. Ukrainian farmers are already holding off on selling rapeseed, anticipating higher prices in spring 2024 as the EU's demand for rapeseed intensifies amid supply shortages.

While China's trade tensions with Canada have rattled the market, global rapeseed and canola prices are showing resilience due to ongoing supply concerns, particularly in the EU and Ukraine. The long-term outlook for the market remains uncertain, as geopolitical factors, weather conditions, and shifting trade dynamics continue to play a critical role.