A halt in U.S. purchases of Canadian wheat would increase domestic consumption and reduce U.S.’s ability to export
Canada has dodged import tariffs for now, but we should be vigilant because we are likely to see them imposed in the coming months.
However, even though tariffs are likely to be introduced in the next few months, the chances of an across the board 25 per cent import tax are remote. This delay provides at least a temporary reprieve for the Canadian grain and oilseeds sector.
On the surface, wheat exports are vulnerable to U.S. tariffs, but the diversity of the buyers for CWRS will be the saving grace for Canadian wheat prices.
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Canadian grain, oilseed and pulse exports are off to a slow start, but there are some bright spots, according to the Canadian Grain Commission’s most recent weekly export data report.
The latest data from the Canadian Grain Commission for wheat exports by destination shows that at the end of November, the United States was the sixth largest importer of Canadian wheat at 322,800 tonnes. Now, the loss of the sixth largest exporter for a commodity is usually a big deal, but in this case there are two mitigating factors.
The first factor is that wheat exports to the U.S. have been front-loaded due to the tariffs. Using weekly exports from the grain commission, wheat exports to the U.S. and/or Mexico from primary elevators are at a record 698,400 tonnes for the crop year to Jan. 12.
The exports from primary elevators are now at levels that are above the entire crop year exports for wheat to the south for three of the past five years. In other words, U.S. imports are nearing their normal entire crop year demand half way through the 2024-25 crop year.
Secondly, the diversity of the export markets for wheat works in the favour of the Canadian wheat market.
To the end of November, a total of 50 countries have imported Canadian wheat. The largest importers are from Asia (Japan and Indonesia) and South America (Peru, Colombia and Ecuador). These markets are also destinations for U.S. wheat.
If Canadian imports are halted by tariffs into the U.S., that would increase domestic consumption. This reduces the amount of wheat available for export from the U.S. that could be replaced by Canadian grain.
This is a perfect illustration of how tariff barriers impact trade flows more than they change prices for the commodity. It’s good news for the Canadian wheat market, whether tariffs arrive sooner or later.
