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TUESDAY 02.25.25
Grain & oilseed futures continued to show some pressure on Tuesday. Funds are selling off contracts, taking profits, and should be looking for areas to buy back in soon as the fundamentals haven’t changed enough to alter the trend significantly. The supports, resistances, and targets outlined in our Week Ahead update are still intact. We will see how the week finishes out and take our cues from that.
The USDA will host their annual Agricultural Outlook Forum on Thursday & Friday this week. They always announce the first US corn & soybean acreage estimates at this event. That is something we are keeping an eye on. We are also planning to attend some of the online seminars this year on your behalf. We will report back anything important from the event.
India has a couple days left to extend the zero tariff policies on Yellow Peas. I have been checking in daily for some update from the Indian Government. There is nothing showing up on their reporting website. I did read that some analysts expect the policy to be extended into the summer and that India’s yellow pea crop isn’t looking great, maybe 1/3 less than last year. We will let you know when the news drops on this.
We chat about all the latest buzz with Trump, tariffs against Canada, EU/UKR crop issues, pipelines, India veg oil tariffs, and the latest Ag Canada S&D estimates in today’s news update.
Trump announcing that tariffs against Canada were on track for March 4th is all over the news today. There are so many takes on how this is going to impact the markets. We haven’t changed our sentiment on this. I’m not going to fire-sell everything in reaction to what might be empty threats. There are a lot of reasons why Trump might consider shying away from the tariffs again like he did last month. There are also ways that the tariffs could help our prices or at a minimum, go unnoticed in some cases.
https://globalnews.ca/news/11032938/trump-tariffs-canada-mexico-march-4-deadline-on-time/
This news article outlines some things that Trump might have to reconsider, and I align with the key takeaways. The stock market has always been an indicator that Trump uses to measure success. The last time he announced tariffs, the S&P tanked. He delayed the decision by a month shortly after. The S&P isn’t fairing too well today either, and I wonder what that chart trend will look like in March if Trump follows through with the tariffs. A crashing stock market is not a good measure of success.
Gas prices are another consideration. Trump prioritizes lower fuel for Americans. There is no easy substitute for Canadian oil. The oil tariff will no doubt raise the price of crude oil futures and the US price of fuel at the pump. We’ll talk more on fuel shortly.
Inflation is another piece of the puzzle that Trump talked about lots during the election. The Federal Reserve thinks his tariff policy will go against their efforts to reduce inflation & stabilize the economy. Rising inflation leads to higher interest rates and higher costs to American citizens.
The final point in the article that really resonates with me is that the key takeaways can ensure that upcoming tariffs will be more limited in terms of scope, duration, or magnitude than currently anticipated. Maybe that means a 25% tariff is directed to less important products. Maybe that means ag, oil, etc. can dodge the big bullets. We will see.
https://financialpost.com/news/4-things-kryptonite-trump-tariff-threats
With these new Trump media clips in play I think we should review the special tariff report that we did earlier in February.
Canadian Ag products that are imported by the US and traded in USD futures (oats/wheat/soy/corn) may see some reduced basis, but the futures should rally because it can tighten the supply that is “cheaper” for the US to purchase.
The initial reaction for the CAD might be to drop back towards 68 cents or lower. That’s when we need to be considering scooping up wheat & soybean basis. But we are also monitoring the USD closely because if it drops off to a new low, which is very possible, it will result in higher grain & oilseed futures values and a stronger CAD.
Canadian Ag products that are imported by the US and traded in CAD futures (canola) might have the opposite effect. Futures will drop temporarily. If this is the new norm the market finds balance and returns to trading normal S&D once that balance is found. Basis at the crusher can widen if the crusher is passing on tariff costs to the farmer. I’m still assessing what could happen to canola basis at the elevator.
I still think the S&D situation for canola can put futures back up to where they were last week or higher. I’m still aiming for the gaps at $700-710/T for a portion of old crop.
Canadian Ag products not traded in futures could see some negative effects based on the amount of product that is exported. Durum, rye, flax, and mustard would be the top 4 that can be impacted negatively. Barley prices may increase if less corn is being imported from the US. We saw some of that happening last week, but the rise was also due to the rising price of corn.
This is all speculating a long duration of tariffs. Hopefully some resolution during upcoming meetings can change the course of the impending trade war.
Here is a list of the products affected by Canada’s 25% retaliatory tariffs against the US. This is an old article from earlier in the month.
https://globalnews.ca/news/10993895/canada-counter-tariffs-full-list/amp/
Some notable items in the list are oats, rye, wheat, farm machinery, rubber tires, tools, twine and meat. Long lasting tariffs could make products on this list more expensive if the sellers are passing the added costs onto the buyers (you). Steel & aluminum tariffs can make equipment and bins more expensive if they are being built in the US, for example.
Some folks have been asking about fuel prices and there are a couple things to consider. The tariffs by the US can drive the price of crude oil higher which makes the global price of fuel increase. The reduced oil exports can result in more available domestic supply of refined fuel for Canadians. These two events can offset eachother somewhat. That part is the unknown. I still lean to purchasing fuel for spring/summer needs as there is typically a higher demand that pushes price up into that time frame. Crude oil has also enjoyed some nice pullback recently. That should be reflected in current prices.
I find it very conflicting that Trump also announced this week that he wants to reinstate the build of the Keystone XL Pipeline that was meant to carry Canadian oil sands crude to Nebraska. They obviously need the oil so why go through the headache of adding tariffs. The drug/border situation is out of control, we can’t deny that. But I don’t see how tariffs are the solution to that. Canada needs to focus on cleaning up the rising drug problem and tightening up the border, and Trump needs to stop pointing at his neighbours as the reason behind the current state of the US economy.
https://financialpost.com/commodities/energy/oil-gas/trump-canada-us-keystone-xl-oil-pipeline-built
Here are some concluding thoughts about the impacts of tariffs:
Generally, U.S. tariffs on Canadian products don’t directly affect Canadian consumers because the tariffs are applied when Canadian goods are exported to the U.S. However, they can still indirectly lead to higher prices for Canadian consumers in some cases.
For example, if a Canadian company faces higher costs due to U.S. tariffs, they might raise prices for their products domestically to cover those costs, especially if the company relies heavily on exporting to the U.S. or if the global supply chain is impacted.
In addition, tariffs can reduce the competitiveness of Canadian goods in the U.S., which could hurt Canadian producers, potentially leading to job losses or reduced production. This, in turn, could affect the domestic economy and the prices of goods in Canada. But in terms of directly making U.S. products more expensive for Canadians to buy at home, that’s not typically how tariffs work.
Canadian tariffs on U.S. imports typically make those products more expensive for Canadian consumers. When Canada imposes tariffs on goods coming from the U.S., the added costs are usually passed along to consumers in the form of higher prices. The tariff is essentially a tax on the imported goods, which can raise the cost of manufacturing or retail prices for those products.
For example, if a tariff is placed on American-made cars, Canadian car dealerships may raise their prices to account for the extra cost they face when importing those vehicles. This can make the product less affordable for consumers and may also encourage them to look for alternatives, either from Canadian manufacturers or from other countries that don’t have tariffs.
I’ve had a few folks asking me about India adding import tariffs on vegetable oils and how that might affect our canola markets. They have already raised import taxes on vegetable oil and during that time canola has enjoyed a pretty big jump from the lows. Even after this week’s setback, canola prices are still over $1.50/bu off the lows from late 2024.
If India moves ahead with another increase to their veg oil import tariffs it can have a few effects. It can increase their domestic price of veg oil. I’m not sure how that helps a country that is trying to fend off food price inflation, but that’s for another discussion. They are one of the top users of cooking oil in the world. I don’t see that stat changing any time soon.
It can reduce the demand, competition, but potentially raise the global price of palm oil & soy oil because those are the main products that India imports. If India were to increase purchases of canola in the event of higher import costs for other products, that could lead to a higher futures value for canola. If there are any negative effects to be seen from this I believe they would be temporary jitters by the funds.
The IGC released their latest reporting late last week. They estimated the world total grains (wheat & coarse grains) production was cut by 3MMT (1%) from the previous report. Global wheat stocks are forecast to tighten by 1% or more depending on the outcome of the Russian & North American crops in 2025. Both have been dealing with adverse weather, which we have been talking about in previous news updates.
Global lentil use is expected to rise by 12% for the current crop year due to a stronger global harvest. A rebound in Australian production in 2025 could be a negative factor to consider down the road. That doesn’t change the current price outlook for old crop lentils into March & May.
https://www.igc.int/en/gmr_summary.aspx
The latest MARS bulletin on EU crops shows some mixed reviews. There are some crops in good condition but there are lots of concerns across the pond as well. Heavy rainfall has created further crop issues & poor crop development for parts of France. The wheat crops are struggling there right now.
There is a significant rainfall deficit for eastern Europe. Winter crops are suffering from limited water availability since the beginning of the season. Ukraine is experiencing a rain deficit as well and has prevented crop recovery from the poor conditions during emergence. Lack of snow cover is adding to the concerns.
Parts of Turkey are experiencing the rain deficit as well. This can affect crop development down the line. Maybe Turkey won’t be such a hindrance on our durum export to Africa this year. That would be a big help to prices!
Ag Canada released their latest S&D estimates for Canada crops last week. They didn’t make many earth-shattering changes so we didn’t bother to send out the links last week. Here’s the updated charts & tables just in case you are interested!
Here are some highlights from the report:
They reduced Durum stocks by 23% for the 2025 crop year, citing higher exports/use and a lower carry-in from 2024. They raised the oats stocks by 6% due to a slowdown in export pace. Stocks are still forecast to be closer to the low-end since 2000.
Canola stocks were bumped up by 4-5%. I’m not sure why or how they came up with that bump. It doesn’t make sense to me since no other stats were changed. The outlook is still tight with stocks at 1 million tonnes or less.
Pea stocks took a sharp shot higher with a 30% increase for 2024 and a 27% increase for 2025. They are citing a big drop in domestic use as the reason for the increase in stocks. The market has been quiet this year so maybe that’s a sign of limited upside for the yellow pea market going forward. Some more things we have to stew on, and decide on next steps forward for recommendations.
Lentils stocks were cut by 3% for 2024 and by 8% for 2025. That could be one reason why we saw a little life in the lentil market last week. That also adds another check-off for why we can be a little patient on those final old crop sales.
The ‘Have Your Say’ survey is still available if you’re looking for something to do to kill 5 minutes. We will run it for the rest of the week and then look at the results. Here’s a link if you missed the text last week.
