Canada Markets

With talks ongoing between United States and China trade negotiators, speculation grows over how trade actions will affect global trade patterns for commodities should current threats lead to actions. Monday's Financial Post quotes U.S. Secretary of the Treasury Steven Mnuchin stating, "We're having very productive conversations with them. I'm cautiously hopeful we'll reach an agreement, but if not we are proceeding with these tariffs."

While soybeans were not on the original list of the 120 products named by China in its plans for retaliation, it cannot be completely ruled out, which could have implications for competing oilseeds and exports from Canada. At the same time, the threat could be an idle one. DTN Senior Analyst Darin Newsom said China is not in a position to limit badly needed supplies from the U.S.

This comes at a time when Dow Jones is reporting official Chinese data that points to a sharp year-over-year decline in oilseed and product imports from North America versus year-ago volumes. China's official February import data reports that soybean imports from the U.S. have declined 24.4% from February 2017, while falling 43% from Canada over the same period. Rapeseed imports from Canada have fallen 38.2%, while rapeseed oil imports from Canada has fallen by 41.4%. According to China's estimates, rapeseed meal imports from Canada in February have fallen just 1% from last year's volumes. February imports of soybeans from Brazil are reported to be 154% higher than February 2017.

The attached chart shows the five-year trend in Canada's canola exports to China, as reported by Statistics Canada (blue bars), which shows volumes consistent over the past four of five years and close to 4 million metric tons. The green bar shows year-to-date movement in the first six months of the 2017/18 crop year (Aug/July), or the August-through-January period, reaching 2 mmt.

The brown line shows the volume shipped in the first half of each crop year over the past five years. During this period, an average of 47.6% of total crop year exports to China were realized as of the first half of the crop year, while an average of 44.7% of total exports to China were realized in this period over the past four years. This historical pace projects forward to a potential volume of 4.2 to 4.5 mmt of potential shipments to China in 2017/18, while any hint of trade war could add to this potential.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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