The giant American taxation and spending bill passed and signed into law last week was generally positive for crop prices because it created favourable policy for biofuel.
The legislation, dubbed the Big, Beautiful Bill by president Donald Trump, is indeed massive, and the headlines are all about issues such as making permanent tax cuts that were initially brought in 2017, increasing funding for the border and migration crackdowns, and cutting funding for government medical coverage.
The portions dealing with biofuel are comparatively small but important to an industry that has faced much uncertainty this year.
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Biofuels inclusion in U.S. “Big Beautiful Bill” thought to be a silver lining for Canadian canola in the first week of July.
The good news for western Canadian farmers is that early analysis shows Canadian canola oil will be able to access the bill’s subsidies, although not at the most favourable levels.
Nevertheless, the bill’s provisions should increase the amount of North American-grown oilseeds going into biofuel because it will reduce what until recently had been a growing feedstock, imported used cooking oil and tallow, much of it from China and South America.
The legislation’s support for biofuel will no longer apply to products made with imported used cooking oil and tallow. North American-grown oilseed and domestically produced used cooking oil and tallow will have to fill the gap.
There has been much uncertainty in the myriad of policies that support the U.S. biofuel market this year, resulting in several plants operating below capacity or temporarily closed.
Trump’s constantly changing tariff policies also created uncertainty.
This has affected Canada’s canola crushers, which had until this year found a growing market for canola oil in the U.S. biofuel market.
Those sales have dropped this calendar year, but crushers found other markets to partly offset the decline.
Statistics Canada says global exports of refined canola oil fell 17 percent to 782,525 tonnes in January-May, due entirely to reduced shipments to the United States.
Small increases in refined oil sales to other countries could not offset the 22 per cent decline in sales to the U.S.
However, exports of crude canola oil fared better.
Exports to all countries grew 14 per cent, to 601,009 tonnes, even as sales to the U.S. fell sharply. Increased sales to countries such as South Korea, Mexico and Belgium made up for the lost U.S. sales.
Canadian crushers have found enough demand in domestic and export markets to maintain a record pace. Full crop year crush is expected to be nearly 11.5 million tonnes, up from 11 million in 2023-24.
Passage of the big bill confirms the biofuel provisions, but oilseed markets moved little last week. Prices moved up earlier in June when the two houses of Congress each released their versions of the bill. Both had favourable biofuel policy.
However, the support to soy and canola prices is offset by improving crop conditions in the American Midwest.
Some of Western Canada’s canola also improved, thanks to the rain that bathed much of central Alberta and central Saskatchewan in mid-June. However, much of Manitoba, southern Saskatchewan and Alberta and northern Alberta remain in drought.
Also, oilseeds got little support from petroleum oil last week.
The spike in crude oil that followed Israel and the U.S.’s bombing of Iran was short lived. The ceasefire appears to be holding.
West Texas crude jumped to the mid US$70s per barrel at the peak of hostilities but was back down to the mid $60s last week.
Also, the Organization of Petroleum Exporting Countries and allies, known as OPEC+, is expected this month to increase its scheduled output, a further factor keeping crude oil prices in check.
Markets this week might be affected by a renewed American focus on tariffs.
Trump’s three-month moratorium on his high worldwide tariffs has ended, and while many countries are negotiating with the U.S., few deals are completed.
He threatened last week to again impose tariffs of 50 per cent or more.
Of concern to Canada is Indonesia’s efforts to get a trade deal with Trump.
Last week, in an effort to curry favour, Indonesia promised to buy two million tonnes of American wheat.
Normally, Indonesia is not a big customer for U.S. wheat, but it is often the biggest customer of Canadian wheat. Canada sells it more than two million tonnes for a market share of about 20 per cent, putting us in second place behind Australia, which has a market share of around 34 per cent.
Russia, Bulgaria, Ukraine and Brazil round out other suppliers.
It would be a blow if Indonesia substitutes U.S. wheat for Canadian.
However, that might not happen. Canada’s wheat industry has long cultivated good relations with Indonesia’s millers.
Last year, Canada completed negotiation of the Canada-Indonesia Comprehensive Economic Partnership Agreement, but it has not yet been formally ratified.
