Canada Markets

It doesn't happen often, but a combination of positive developments this week resulted in a $37/mt rally in three days, allowing canola to fully recover losses inspired by the surprising Chinese tariff announcement. The gap lower remaining when trading resumed the following Sunday evening (March 10) is now filled. See the accompanying chart.

The final leg higher was inspired by the outcome of the U.S. reciprocal tariff announcement Wednesday afternoon. With no changes made to the tariff situation with Canada and Mexico, free trade in USMCA-compliant agricultural commodities within North America remains. Critical to canola oil and meal exports, this removes a very dark cloud for the canola industry.

The U.S. Treasury Department stressed ahead of the announcement that this would amount to peak tariff levels with the only changes going forward being reductions based on future negotiations. It has been proven not to trust others speaking for the president, but if this remains so, the reduction of uncertainty likely means as much to the market as anything. At least regarding canola product trade.

The positive news added to Tuesday's unexpected developments on the U.S. biofuel front. A coalition of interested parties (from oil, biofuel and ag industries) arrived at a consensus regarding a new national biofuel policy and met with EPA officials to present their case. They proposed an increased blending mandate for 2026-28 of 5.5 billion to 5.75 billion gallons of biodiesel/renewable diesel compared to the expired 3.5-billion-gallon mandate. That would require an increase in production compared to 2024, implying strong canola oil imports will be required given the limited supply of soybean oil.

It also begins the debate over how such lofty biodiesel and renewable diesel production goals could be reached if Chinese used cooking oil imports are restricted or eliminated by the reciprocal tariff announcement. With total tariff increases on Chinese imports now at 54% since inauguration day (10%+10%+34%), it's hard to imagine the billions of pounds of used cooking oil imports continuing compared to 2024.

With the limited supply of soybean oil, especially given the near record pace of exports to date, canola oil imports will almost certainly be needed. See more here: https://www.dtnpf.com/….

Given China went the two previous years with basically no purchases of canola oil from Canada yet made substantial purchases in January and possibly February prior to their tariff announcement, if they buy no more this year, the market shouldn't be concerned now.

As mentioned in a previous post, January trade data showed China emerged as the top destination for crude canola oil by far; 50,473 metric ton (mt) was shipped to China in the one month alone compared to 665 kilograms in all of 2024, 121,287 mt shipped in 2023 and 185,109 mt shipped in 2022. They could have received close to a year's worth of crude canola oil by the time they imposed the 100% tariffs on March 20. Unfortunately, we won't know for sure until the trade data up to the end of March is available on May 6.

Looking at canola seed export interest, China surprisingly returned as the top destination in January by far. At 393,046 mt, it was almost four times December's 104,890 mt total. It now could be assumed that the strong exports for February may have been dominated by China as well. With seed not being included in the 100% tariffs imposed on canola oil and meal, China likely has been an aggressive buyer recently, taking advantage of the price break that they were responsible for.

And that takes us to the final bullish development for canola this week. Following Wednesday's much worse-than-expected reciprocal tariff announcement (that global countries describe as much greater than reciprocal), anti-American sentiment is almost certain to increase export interest in Canadian canola with China and EU countries the top of the list.

All of this is happening at a time when the pace of canola demand needs to be ratcheted back. With exports of 6.632 million metric ton (mmt) as of week 33 compared to just 3.786 mmt last year and domestic use at a record 7.496 mmt compared to 6.929 mmt last year, the pace of use must slow. On a combined basis, disappearance is running 3.413 mmt ahead of last year's pace while Agriculture and Agri-Food Canada suggests it can only be .865 mmt ahead in order to leave an ending stocks level of just 1.3 mmt. See the problem? And time is running out for prices to rise enough to discourage demand.

**

I welcome feedback along with any suggestions for future blogs. My daily comments can be found in Plains, Prairies Opening Comments and Plains, Prairies Quick Takes on DTN products.

Mitch Miller can be reached at mitchmiller.dtn@gmail.com

Follow him on social platform X @mgreymiller

(c) Copyright 2025 DTN, LLC. All rights reserved.