Canadian canola sector braces for potential U.S. tariff crunch

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This article was published 22/01/2025 (298 days ago), so information in it may no longer be current.

Amid the looming threatened imposition of tariffs on Canadian exports to the United States, the significant integration of the two countries’ economies is particularly stark when it comes to canola.

The U.S. is by far the largest market for Canadian canola seed, oil and meal. Canada ships close to $9 billion worth of canola annually to its southern neighbour, accounting for more than half the value of its canola product exports.

The vast majority of the canola products consumed in America comes from Canada, where producers plant an average of 20 million to 22 million acres (compared to only about 2.5 million acres in the U.S.).

However, Derek Brewin, head of the department of agribusiness and agricultural economics at the University of Manitoba, says that it doesn’t mean American consumers are overly reliant on Canadian canola.

Due to a high level of substitutability in the total oilseed market, “American consumers have options, including a large domestic soybean oils industry,” he said.

About 17 per cent of Canada’s canola crop is grown in Manitoba. There are three canola crushing plants in the province, all of them effectively owned by one company: St. Louis-based Bunge Ltd. (The plant in Ste. Agathe had been owned by Viterra, but the Canadian government has approved the $8.2 billion acquisition of Viterra by Bunge.)

In 2023, Canada exported a total of $15.8 billion in canola seed, oil and meal globally, with $8.6 billion going to the U.S.

U.S. President Donald Trump has threatened 25 per cent across-the-board tariffs on Canadian goods, perhaps starting Feb. 1.

“If tariffs start to happen, who know how it all lands?” Brewin said. “It will definitely be disruptive.

“The sure thing is that canola oil and meal prices in the U.S. will go up if 25 per cent tariffs are imposed. The question is how much does that reduce U.S. demand for Canadian canola oil?”

Brewin said canola oil’s positive characteristics and health benefits may mean U.S. consumers will pay a premium for it.

“If that’s how it works out, the impact might not be too bad,” he said.

Chris Davison, CEO of the Winnipeg-based Canola Council of Canada, said the industry is working hard to make sure the new U.S. administration is fully aware of the extent of the canola market integration between the two countries.

“We are highly and actively engaged both with domestic stakeholders and counterparts in the U.S.,” he said. “We want to make sure the U.S. administration is working with the best information to inform any decisions that they may take moving forward. Those integrated supply chains rely on smooth bilateral trade between the two countries.”

The Canola Council recently completed an analysis of the impact of Canadian-grown canola on the U.S. economy. It showed the United States averages US$11.2 billion of economic activity annually and an average of US$1.2 billion in wages.

“The reality is that there is economic benefits of the integration at every stage of the industry from U.S. processing and refining, transportation, bottling and packaging, food end uses, livestock and more,” Davison said.

Davison said the industry is working hard to be prepared, but the uncertainty is limiting.

Brewin said if American consumers prefer to switch to soybean oil, it could mean the U.S. will consume more of its domestic soy crop, meaning it will not be able to export as much soy bean oil into the international market.

“That could mean we can compete with our canola in the international market,” said Brewin. “But it’s all still painful.

“There’s a built-up supply chain that will have to changed. It will put more pressure on the Port of Vancouver, which is already very busy.”

martin.cash@freepress.mb.ca