Most often, the end of the year and the start of the next one is associated with a fresh start, but not this time for canola futures on the Intercontinental Exchange. The status quo, forged in September, has kept canola teetering on the brink of major upheaval.
The ongoing tariff threat from China continued to loom over the canola market, as did the threat from United States president-elect Donald Trump. No matter how much canola prices increased during the last few months, there was at least one threat poised to erase all gains — and then some.
Added to that is uncertainty surrounding Trump’s policies for biofuels. Although many of his supporters in Congress hail from “red states” in which corn and soybeans are extremely important, the incoming president exudes an air of disdain for biofuels. It might not matter to Trump that he could easily jeopardize the agricultural industry in those states.
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There are lingering questions of what tax incentive the U.S. government will offer the biofuel industry. A good amount of that uncertainty rests with the outgoing Biden administration and Congress. Would the current incentives that favour biofuel manufacturers be kept or would something that benefits farmers replace it?
Expansion in the U.S. biofuel industry was a big reason why that country is Canada’s number one customer of canola oil.
A ban on used cooking oil from China would further increase U.S. demand for canola oil, but if there’s little direction in the industry, that could weigh on canola futures.
Then there’s the speculation of China proceeding with some kind of levy against canola imports from Canada. Participants strongly suspect this has driven Chinese purchases — frontloading before the Chinese government drops its heavy hand with a tariff edict.
Whether or not Chinese authorities have completed their investigation into alleged canola dumping by Canada, at some point during 2025 China is likely going to act. After Canada slapped a 100 per cent tariff increase on Chinese-made electric vehicles, there’s a strong likelihood the government of Xi Jinping won’t let that slight slip by.
Not to be forgotten is South America, with huge soybean crops in Argentina and especially Brazil. The weather in both countries has been much more co-operative than a few months ago, and the influx of soybeans on the global market will weigh quite heavily on other oilseeds, including canola.
Calendar year 2025 may very well be a tough start for canola, but there’s room for optimism.
