Canola farmers feel forgotten amid trade war, ongoing Chinese tariffs

On Margaret Rigetti's family farm near Moose Jaw, Sask., hundreds of thousands of dollars in fertilizer and seed are waiting to go in the ground for spring seeding, but there's lingering fear about what tariffs on canola will mean for this season's crop.

"There's a lot of unknowns," Rigetti said. "It really leaves us wondering if planting this canola crop is the right thing to do."

Canola producers were hit with retaliatory tariffs from China last month, in response to Canada's duties on electric vehicles, aluminum and steel. The 100 per cent tariff affects exports of canola oil and meal.

The Chinese tariffs were announced amid the ongoing threat of tariffs from the United States, causing canola prices to rapidly drop and become volatile, before picking up in recent weeks.

Rigetti, who is also a director on the board of Sask OilSeeds, said the stakes are high for an industry that was built around free trade. Canada exports 90 per cent of its canola production.

"We're glued to the news and getting whipsawed around," she said. "We seem to be in the crosshairs of two global superpowers having a trade war, and they both happen to be our biggest customers." 

Canada sends about $5 billion of canola products to China annually. The vast majority is seed.

Canola meal, subject to tariffs, is a high-protein animal feed, produced after the seeds have been crushed at processing plants. About one-fifth of Canada's canola exports to China last year was meal, valued at about $918 million, according to Statistics Canada.

The U.S. is the top export market, with $7.7 billion of canola goods going from Canada in 2024.

U.S. fuel program impacting demand

A growing source of demand for canola is for use as a biofuel, a base product for creating renewable diesel and aircraft fuel that produce fewer emissions than traditional fuel.

The bulk of the market for biofuel is currently in the U.S., where a recent regulatory change is yet another blow for the canola industry.

In January, the U.S. announced canola based biofuel will not qualify for the Critical Fuels Production Credit — also known as the 45Z tax credit — a disappointment to canola crush processors.

"Without eligibility for that tax credit, we find ourselves having a difficult time to compete in the US biofuel market," said Chris Vervaet, executive director of the Canadian Oilseed Processors Association. "The immediate impact is, where do we sell our products tomorrow?"

Amid all that uncertainty, plans for several multi-billion dollar canola processing plants in Saskatchewan have been put on hold in recent months. The facilities are part of the province's strategy to increase the value-added agriculture sector to $10 billion of revenue by 2030.

Added layer of volatility 

Henry An, a resource economist at the University of Alberta, said the value of agricultural commodities already fluctuates from unpredictable weather and the political climate is an added layer of volatility.

"We don't know how rough it's going to be. We don't know if it's going to change tomorrow, next week. Everybody's just kind of on edge," he said.

The uncertainty looms especially large for the roughly 40,000 farmers that grow canola across Canada, the start of a supply chain that also includes grain elevators, railways, ports and manufacturers.

The federal government recently announced an increase to the AgriStability program to support farmers, raising the compensation rate and doubling the $3-million payment cap.

Rigetti said Western Canadian farmers question why Ottawa would prioritize tariffs for an emerging EV industry in Ontario at the expense of one of the country's most lucrative agricultural products.

She feels farmers have been forgotten in the trade war.

"If our canola industry is going to be sacrificed for a Canadian trade policy that prioritizes other industries like auto or dairy, we have to understand — the hurt to our farms and our communities is going to be devastating."