Prices React to Uncertainty

The canola and rapeseed markets are facing uncertainty as the U.S. considers a 25% import tariff on Canadian and Mexican goods. While traders are still assessing the impact, the price movements in futures suggest some early positioning.

February rapeseed futures closed lower at €477,25 per ton, dropping €31 per ton, as traders shifted focus to May contracts. Meanwhile, May futures saw a modest gain of €4,25 per ton, reaching €516,75 per ton (USD 0,54 per kg).

U.S. Tariff Plans Could Reshape Canola Trade

Before the weekend, former President Donald Trump announced plans to implement a 25% tariff on Canadian and Mexican imports starting in February. While analysts say the market hasn’t fully priced in this move, its effects could be significant if enacted.

The U.S. is a vital market for Canadian canola and meal. According to the Canadian Oilseed Processors Association, the proposed tariff would put Canadian producers and processors in a tough spot. On top of that, recent changes to U.S. biofuel tax breaks add further pressure.

In the first 11 months of 2024, the U.S. imported 96,2% of Canada’s total canola exports—3,14 million tons—and 65,5% of its rapeseed meal, totaling 3,44 million tons. Additionally, 90% of Canada’s canola oil exports head to the U.S., making the country an essential buyer.

Market Prices Show Mixed Movements

Despite the tariff concerns, March canola futures on the Winnipeg Exchange rose 0,5% to CAD 640 per ton (USD 0,44 per kg), marking a 3,9% gain month-on-month. Some market participants had expected a decline, which has yet to materialize.

If canola prices fall sharply, many Canadian farmers may switch to alternative crops, potentially limiting supply and preventing a full-scale price collapse.

The average canola price in Canada stood at CAD 695 per ton in 2023/24, with projections of CAD 645 per ton in 2024/25 and possibly CAD 600 per ton next season. This trend contrasts with the five-year average of CAD 690 per ton.

European Market Faces Additional Pressure

A drop in Canadian canola prices could also weigh on the European market, which relies on Canadian imports. With U.S. and Chinese buyers holding off on purchases in anticipation of lower prices, European buyers may also delay their purchases, adding further downward pressure.

What’s Next for Canola Producers and Traders?

If the U.S. follows through on the 25% tariff, Canadian canola growers and exporters will face challenges finding alternative markets. European demand will play a critical role, but if global buyers remain cautious, Canadian producers may have to pivot to other crops.

For now, traders should keep a close watch on U.S. policy developments. If the tariff is confirmed, prices will likely dip further, making it a risky time to buy. However, a delay or cancellation of the tariff could stabilize prices, potentially presenting a buying opportunity.





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