Posted on November, 28, 2024 at 08:19 pm
Over the next few months, a host of international actions could have unpleasant repercussions for Canadian agriculture. Seldom, if ever, have so many different threats come from outside our borders.
China is investigating Canadian canola for dumping, a response to the 100 per cent duty the U.S. and Canada placed on Chinese electric vehicles. Perhaps no tariffs will be applied on exports of canola to China, but it’s hard to believe they’d make the threat and then not follow through.
Without knowing the magnitude of a potential tariff, it’s difficult to know the impact on Canadian export volumes and prices. When one door closes in the trade world, it usually means another door opens. However, the transition could take time and inflict some pain.
Many observers expect a U.S.-China trade war after the inauguration of President-elect Trump on Jan. 20. How that will play out is anyone’s guess. Unfortunately, Canadian exports of all grains, oilseeds and pulses could be caught in the crossfire.
Analysts say the uncertainty is already weighing on the canola market and is one of the reasons for the recent price sag.
It will also be important to watch what Trump does on biofuel policy. The renewable fuel folks in the U.S. haven’t been very happy with the Biden administration’s policies. Will Trump’s policies open the door to more renewable diesel and sustainable aviation fuel to the benefit of Canadian canola oil or will this market diminish?
The dramatic expansion of canola crushing capacity in Western Canada is in large part due to the anticipated demand for biofuels. It’s always scary to build capacity based on government mandates — mandates that can change over time.
While Trump has been unequivocal on large trade tariffs against China, his policy position on biofuels isn’t as clear. However, his “drill, baby drill” mantra shows full support for enhanced fossil fuel development.
As Trump prepares to take office, the war in Ukraine has escalated. Trump is widely expected to cut American military aid to Ukraine. President Biden seems determined to give Ukraine further assistance while he’s still in power. Russia has responded in kind.
When the war in Ukraine first occurred, grain markets ratcheted higher immediately. With two top wheat exporting nations at war, it seemed natural to worry about global food security.
As the war dragged on, grain markets paid less and less attention. Russia continues to export grain and, against all odds, so does Ukraine. One has to wonder where the escalation in hostilities may lead.
Meanwhile, bloodshed continues in the Middle East. So far, this has had little impact on oil, fertilizer or grain prices, but it’s an unpredictable powder keg that has spawned ugly protests in Canadian cities.
As if poor trade relations with China weren’t enough, Canada has also managed to further sour relations with India, another major customer for our grain.
So far, this has been restricted to a war of words and the expulsion of each other’s diplomats. Hopefully, trade will continue unhindered, but one never knows.
Yet another Trump effect even before taking power can be seem in the slumping value of the Canadian dollar. That’s considered good news for the value of grains and bad news for all the inputs like farm machinery that come from the U.S.
Grain market analysis used to focus on supply, demand and stocks-to-use ratios. These days you need a crystal ball on international policy and trading relations.
Source: Producer: