Insight: Tariffs on canola seen supercharging Canadian farmers' shift to spring wheat
Farmers are still putting their crops in the ground, so it is not yet possible to know the extent of the acreage shift into wheat. However, early signs, based on interviews with more than 20 Canadian and U.S. farmers, agricultural analysts, traders and industry organizations, show that the grain primarily used to bake bread is proving to be a big winner in this year's global trade war.
China's 100% tariffs on Canadian canola meal and oil and its threat to impose duties on canola seed, amid President Donald Trump's broader global trade war, have rattled Canadian farmers, who since 1990 had nearly quadrupled their canola acres before paring back in recent years because of growing problems with drought, high production costs and crop diseases. Now, tariffs are expected to accelerate the likelihood that thousands of farmers could further cut back, adding up to hundreds of thousands or even millions of acres less canola, and more wheat, farmers and analysts estimated.
"There is going to be a massive switch," said Jerry Klassen, a Manitoba farmer and market analyst with Resilient Capital. He has switched hundreds of acres on his own farm from canola to spring wheat this year and thinks like-minded farmers will do the same.
Reuters' reporting on fallout from tariffs in grain markets illustrates how global trade turmoil is causing the neighboring countries to diverge on spring wheat production. Canada's rebounding supply of wheat has kept prices down for millers who fuel global bread demand as well as consumers. The shift to Canadian fields has also offset some worry about the long-term decline in U.S. production area.
Politicians in Canada are funding and supporting the shift toward greater wheat production as a way to shield the thinly-populated agricultural export powerhouse of Western Canada from foreign pressure. And farmers have their own motivation: improved wheat varieties have boosted the grain's profitability. Adam Dyck of U.K. breadmaker Warburtons in Winnipeg said some Canadian farmers had tripled their production to 90 to 100 bushels per acre since the 1990s.
The shift toward wheat reflects canola's vulnerability to tariffs. Most of the C$14.5 billion ($10.59 billion) 2024 Canadian canola exports go to the U.S. and China, with the U.S. biofuels market consuming most of Canada's canola oil while China buys most of Canada's seed exports to crush for edible oil and animal feed, while wheat is sold to dozens of countries around the world. Some Canadian farmers are expecting that in a prolonged trade war, globally-diverse wheat is a safer bet than U.S. and China-dependent canola.
In 2024 Canada shipped two-thirds of its total canola seed exports to China, and 95% of total canola oil exports of 3.5 million tons to the U.S. But Canada's wheat exports were "highly diversified," the U.S. Department of Agriculture noted., opens new tab
The world's wheat and canola markets will be guessing for weeks about Canadian farmers' final decisions on what to seed. Statistics Canada's next report is scheduled for June 27, and the numbers for that report are being collected before farmers have finished planting.
Scott Huso, a farmer in Aneta, North Dakota, said that across the northern Great Plains, stretching from Minnesota to the Montana Rockies, farmers have been planting less wheat in favor of crops like corn and soybeans, which are generally more profitable. University of Minnesota data found that last year, farmers in central Minnesota earned hundreds of dollars in operating profit per acre with corn and soybeans, but lost money on spring wheat in 2024, opens new tab.
"Wheat, you're not making money on it," Huso said.
U.S. total hard red spring wheat production hasn't changed much since the mid-1990s because of substantial improvements in the amount grown per acre. However, total acres are in long-term decline, dropping from 15-20 million acres in the mid-1990s to 13-15 million in the mid-2000s to 10-13 million in the mid-2010s. The U.S. Department of Agriculture said on March 31 that it expects hard red spring wheat acreage in 2025 to drop to 9.4 million acres -- the lowest since 1970.
Yet spring wheat is in great demand from the world's millers and bakers. Its high protein content allows it to be used as the base for top-quality bread flour, or as something to blend with lower-quality, cheaper wheats. The U.S. and Canadian plains are the most reliable major source of the world's high-quality spring wheat. Yet that doesn't always lead to the kind of premium prices U.S. farmers might need to justify growing the crop, with steady Canadian supplies and those from overseas competitors like Russia keeping millers comfortable enough to avoid bidding wars, a frustration for many U.S. farmers like Huso.
"You just can't convince guys to love wheat these days," said Huso, a member of the North Dakota Wheat Commission. Committed wheat growers like him and organizations like the commission and export-focused U.S. Wheat Associates are trying to convince buyers to pay higher prices and breeders to produce better wheat crop varieties to help wheat compete for U.S. farmers' fields.
It's been an uphill struggle.
In Canada, the mood is different. Rather than getting knocked out of the crop roster, more farmers are warming to wheat.
In May, farmer Korey Peters finished seeding 1,700 acres of spring wheat on his farm near Winnipeg. With new varieties providing more crop per acre, and canola costly and hard to grow profitably in his area, he said he's been putting more and more of his land into wheat and corn.
"I know some people call it 'poverty grass,' but it works for us," Peters said.
($1 = 1.3691 Canadian dollars)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Guardian
28 minutes ago
- The Guardian
Trump signs order increasing tariffs on Canadian goods from 25% to 35%
Donald Trump signed an executive order on Thursday increasing tariffs on Canadian goods imported to the United States from 25% to 35%. The new import tax rates goes into effect on Friday, according to a White House factsheet. The tariff would cover all products not covered by the US-Mexico-Canada trade agreement. Goods transshipped to another country to evade the new tariffs would be subject to a transshipment levy of 40%. The decision comes after months of tariff threats from the Trump administration, and escalating trade tensions that have sowed anger in Canada. It was announced just hours before a 1 August deadline Trump had imposed on many countries to reach a trade deal with the his administration. The White House said on Thursday evening that Trump had increased tariffs on Canada because the country had failed to act on 'the public health crisis caused by fentanyl and illicit drugs flowing across the northern border into the United States'. In the early hours of Thursday morning, however, Trump had posted on social media that he might not strike a deal with Canada on tariffs as punishment for its decision to recognize the state of Palestine. 'Wow! Canada has just announced that it is backing statehood for Palestine,' Trump wrote on his Truth Social platform. 'That will make it very hard for us to make a Trade Deal with them. Oh' Canada!!!' Officials in Ottawa have repeatedly noted that only a minuscule amount of fentanyl entering the US originates from Canada. Still, they have taken measures to strengthen the border. Howard Lutnick, the US commerce secretary, said Trump could reconsider the tariff if the Canadian prime minister Mark Carney 'starts turning on the charm and if he takes off his retaliation'. Carney had said on Wednesday that trade talks between both countries had been constructive but might not conclude by the deadline. He reiterated a deal removing all US tariffs was unlikely. Carney has to coordinate his reaction with that of the 10 provinces, some of whom want a hard line and others who prefer a softer approach. William Huggins, an assistant professor in economics at McMaster University in Ontario, told the Guardian that Canada was in a vulnerable economic position, having closely intertwined its economy with its larger neighbor. 'Canada has tried to negotiate sort of forcefully from a position of not acquiescing to every demand, but by the same token, has also realised it's not in the strongest position to do so … We've had to navigate carefully,' said Huggins. Canada sends around 75% of all its exports south of the border. Since March, Trump had imposed several tariffs on Canadian goods and energy resources, including a 25% tariff on all goods, excluding potash and energy products, and a separate 10% tariff on energy resources, including potash. There's was also a 50% tariff on steel and aluminum imports and a 25% tariff on autos and auto parts. Carney told reporters in June that if the two countries do not reach a trade deal by 1 August, Canada would likely impose more counter levies on US exports of steel and aluminum.
The Guardian
28 minutes ago
- The Guardian
China's fast-fashion capital slows down under Trump's trade war
Lingering at a day market for labourers in Panyu, an urban village on the outskirts of Guangzhou, Ms Qiu looks dejected. She is looking for a local factory that will hire her for the day to sew clothes – cheap tops and dresses that will be churned out on to China's e-commerce platforms, or bundled up for export to western shoppers. But she is not having much luck. 'The whole industry is struggling, and now there is a high tariff on Chinese goods because of the trade war. Many foreign clients have decreased their orders from China,' she says, declining to give her first name. Guangzhou, China's southern metropolis and the capital of Guangdong province, is home to nearly 20 million people. It is also the humming, whirring and buzzing heart of the global fast fashion industry. In its urban villages, ramshackle settlements that have been absorbed into the city's sprawl, millions of workers toil day and night in informal workshops to produce cheap garments. In one small, crowded factory, women sit behind sewing machines next to teetering mountains of starched black tutus. In another, pink denim jeans destined to be sold on fast fashion website Shein are piled high on every available worktop. Every morning, workers gather in informal labour markets like the one in Panyu to see if they can find work for the day sewing on hundreds of buttons, or ironing hundreds of collars. Depending on the complexity of the task, workers earn between one and 10 yuan per item, toiling for long hours in cramped conditions. 'This is hard-earned money,' says a worker in his 60s in Datang, another urban village about ten miles north of Panyu. Ironing jackets at 8am, before packaging them up to be exported, the man, who declined to give his name, was part-way through a shift that had started at 11pm the night before. He earned two yuan per jacket, he said. More than a dozen garment workers interviewed by the Guardian all said that a normal working day was 10 to 12 hours, with some saying they only took one rest day each month. While China's domestic e-commerce market has boomed in recent years, it is overseas orders that keep the factory lights on. Around one-quarter of the more than $100bn of textiles and apparel imported to the US came from China last year. Guangdong alone exported more than $7bn, according to data from the Global Trade & Industry Growth Lab by Sinoimex, a commercial data firm. But in April, Donald Trump, the US president, launched a trade war with China, which sent shockwaves through the global economy. Tariffs on Chinese goods reached 145%, with China responding with similar duties and trade restrictions, before the two countries agreed to a 90-day pause in May. With a 12 August deadline looming to reach a deal, workers in Guangzhou are wondering whether or not they'll be able to keep selling clothes to Americans. In Panyu, Yang Ruiping has run his small clothes factory, which specialises in tops and employs about 20 people, for two decades. About 30% of his orders are exported, mostly to Shein and Amazon, down from more than 50% before the pandemic. Although the pause in the trade war has eased the pressure on his business slightly, he still has 'little confidence in the US'. 'In the recent US-China trade war, if the tariffs go up, we need to lower the production costs to combat it,' he says. 'It leaves little room for profit'. With no room to cut wages any lower, Yang says he is already losing money on every top he sells. He keeps accepting the orders in order to keep the factory open, but with the domestic market becoming increasingly competitive, he is aware he might not be able to operate much longer. Shein is everywhere in Panyu. The China-founded, Singapore-headquartered company revolutionised the garment industry in Guangzhou, allowing small manufacturers like Yang to sell directly to western customers, and offering shoppers rock-bottom prices. While big high street brands operate larger, dedicated factories, Shein places small batch orders directly with independent manufacturers, ramping up production for the designs that sell well online. The flexibility of this model has fuelled the company's meteoric rise. Shein accounts for about 50% of the US fast fashion industry, according to Bloomberg Second Measure, a data analytics firm. The company's growth has also been thanks to a loopholes in the US customs regime, which allowed low-value goods to be imported free. In 2022, over 30% of all the small packages imported under the so-called 'de minimis' exemption came from Shein and Temu, another Chinese e-commerce company. On 2 May, Trump closed that loophole for goods from China and Hong Kong. This week, he expanded that ban to goods from all countries, meaning that suppliers can't avoid tariffs by shipping via third countries. A recent analysis by Reuters found that prices on Shein increased by an average of 23% between 24 April and 22 July. The US market is 'volatile and risky,' says Peng Jianshen, the boss of a medium-sized denim clothes factory in Zengcheng, another of Guangzhou's urban villages. 'When tariffs were suddenly increased, the entire US-focused production stopped. No one dared to continue'. Experts say that the uncertainty of the trade war could have a negative impact on working conditions, encouraging workers to add hours to their already punishingly long shifts. 'Generally, when we're talking about the garment industry in China, workers don't have rest days,' says Li Qiang, the founder of China Labor Watch, a US-based NGO. 'They're paid by piece rate. So they work as much as possible when the orders are still there.' But factory bosses in Guangzhou say the trade war is only the latest in a series of problems facing their industry. Global conflicts and low consumer spending in China mean that it's hard to pivot away from the US and towards other markets. Li Jun, a chain-smoking factory boss, runs a denim clothing factory that sells jeans to Russia. He says the economic impact of the war in Ukraine, plus the fact that many of his would-be customers have been drafted to fight in the conflict, have been bad for business. 'The economy is not doing well anywhere,' he says. 'A lot of factories are shutting down.' At his peak he was exporting 100,000 pairs of jeans per month, with more than half going to Russia, but now it's 30,000 to 40,000 pairs each month, meaning that he just about breaks even. Manufacturers in places like Guangzhou have long been the engine room of China's growth. But in recent years, keen to shed the label of being the world's factory, Beijing has been pouring all its political and economic support into hi-tech industries, such as artificial intelligence and semiconductors. 'The Chinese government no longer supports these kinds of light industries or small individual businesses,' Li says. 'It's really hard to keep things going'. Additional research by Lillian Yang
The Guardian
28 minutes ago
- The Guardian
Australia dodges latest Trump tariff hikes as most imports held at 10%
Australian goods imported into the US will continue to attract the baseline 10% tariff, with Australia dodging any tariff increase in the latest round of Donald Trump's global trade war. On Thursday night US time – Friday morning in Australia – Trump issued an executive order confirming new tariff deals for several trading partners, as well as revised tariffs for a number of other countries. Australia is not mentioned in the order, which stated that any countries not on the new list would remain at a 10% tariff rate. 'The White House has confirmed that no country has reciprocal tariffs lower than Australia,' a spokesperson for Australia's minister for trade, Don Farrell, said on Friday morning. Sign up: AU Breaking News email 'While we remain in the best possible position under the United States' new tariff regime, we will continue to advocate for the removal of all tariffs in line with our free trade agreement.' Farrell was due to speak in Adelaide later on Friday. In the executive order issued this week, Trump indicated he was open to further negotiations on tariffs, for countries he saw as aligned to his America First ideology. 'Some trading partners have agreed to, or are on the verge of agreeing to, meaningful trade and security commitments with the United States, thus signaling their sincere intentions to permanently remedy the trade barriers that have contributed to the national emergency declared in Executive Order 14257, and to align with the United States on economic and national security matters.' Executive Order 14257 was Trump's April order, which argued that 'large and persistent annual US goods trade deficits constitute an unusual and extraordinary threat to the national security and economy of the United States'. Trump's latest executive order castigated unnamed countries he felt had shown insufficient fealty to the US on trade. 'Other trading partners, despite having engaged in negotiations, have offered terms that, in my judgment, do not sufficiently address imbalances in our trading relationship or have failed to align sufficiently with the United States on economic and national-security matters,' the order read. 'There are also some trading partners that have failed to engage in negotiations with the United States or to take adequate steps to align sufficiently with the United States on economic and national security matters.' The new executive order punishes small economies in particular, who have limited trading relationships with the US: Syria was given a 41% tariff rate, Myanmar and Laos 40%. The EU has a split tariff rate: 0% on some goods, and 15% on others. Sign up to Breaking News Australia Get the most important news as it breaks after newsletter promotion China, one of the US's largest trading partners and a target of Trump's trade ire, is not mentioned in the latest order. It remains at a 30% tariff rate, with some exemptions for goods such as smartphones and semiconductors. A proposed – punitive – 145% tariff on Chinese imports has been paused until mid-August. The US treasury secretary, Scott Bessent, told reporters the US has the 'makings of a deal' with China, but that it's not yet complete. 'There's still a few technical details to be worked out on the Chinese side between us. I'm confident that it will be done, but it's not 100% done.' With tariff negotiations still in play, Trump has taken aim at countries that negotiate with American drug companies to pay lower prices for pharmaceuticals, such as Australia. Under Australia's Pharmaceutical Benefits Scheme, the government negotiates directly with drug companies to secure comparatively low prices, a long-standing arrangement, but one which has been a consistent irritant for Trump. Australia has been consistent in its dealings with the Trump administration that 'the PBS is not up for negotiation'. 'Our government is getting on with the job of delivering cheaper medicines for Australians,' a government spokesperson said.
