Insight: Tariffs on canola seen supercharging Canadian farmers' shift to spring wheat

Reuters

2 days ago

WINNIPEG, Canada, June 9 (Reuters) - In the U.S. Great Plains, where spring wheat once dominated fields, farmers are turning away from the crop. But across the border in Canada, the pinch and prospect of Chinese and U.S. tariffs on canola have prompted farmers to pick up the slack on 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)