North American grain/oilseed review: Canola drops as trade war begins

By Phil Franz-Warkentin

Glacier FarmMedia MarketsFarm — The ICE Futures canola market fell sharply lower on Tuesday, as markets reacted to the developing global trade war triggered by import tariffs imposed by the United States and resulting retaliation.

The U.S. is a major destination for Canadian canola oil, with that business now facing 25 per cent tariffs. Broad weakness in the U.S. soy complex, as China announced its own countermeasures targeting U.S. agriculture, contributed to the weakness in canola.

European rapeseed and Malaysian palm oil futures were also lower on the day.

Chart-based selling was a feature, with some stops hit on the way down as speculators attempt to cover some of their large net long position.

Tightening supply projections and the need to ration demand remained somewhat supportive.

There were 73,961 contracts traded on Tuesday, which compares with Monday when 36,985 contracts changed hands. Spreading accounted for 33,616 of the contracts traded.

SOYBEAN futures at the Chicago Board of Trade were sharply lower on Tuesday, as the broad tariffs imposed by United States President Donald Trump on Canada, Mexico and China sparked a selloff in the commodity and equity markets.

China announced it would impose its own retaliatory tariffs on U.S. soybean imports and suspended all imports from three U.S. grain exporters. There are currently about 1.6 million tonnes U.S. soybean sales to China still on the books that have yet to ship.

The advancing Brazilian harvest and recent weather improvements in Argentina also weighed on values.

Monthly crush data released after yesterday’s close showed 212.5 million bushels of soybeans were crushed in the U.S. in January. That was down by 2.3 per cent from the previous month, but still 9.4 per cent ahead of what was processed in January 2024.

CORN futures were also pressured by bearish technical signals and the trade war. Mexico is a major buyer of U.S. corn and is expected to announce its own retaliatory measures within the next few days.

U.S. ethanol producers used 457.4 million bushels of corn to produce the renewable fuel in January, according to monthly data. That was down by 4.6 per cent from December, but up by 3.7 per cent on the year.

WHEAT was down across the board, caught up in the broad selloff in all markets. The U.S. Department of Agriculture did report flash sales of 130,000 tonnes of white wheat to South Korea this morning.