U.S-China  Spat Likely Has Canadian Farmers Back Shifting to Canola

(Bloomberg) -- The brewing trade war between China and U.S. is having a spillover effect on Canada’s farmers.

The trade spat has caused a drop in North American grain prices that probably prompted Canada’s growers to abandon some of their plans to plant more wheat and instead shift back to canola. The nation’s farmers likely sowed 21.87 million acres of canola in 2018, up 2.3 percent from the government’s April estimate, according to a Bloomberg News analyst survey. Statistics Canada will release its estimates on Friday at 8:30 a.m. in Ottawa.

Even with the shift, the forecast for canola acres would still be 4.9 percent below last year’s plantings. Still, that’s smaller than the 7 percent drop the government predicted in April. The earlier projection seemed “extreme,” and growers probably made some minor shifts to take advantage of the crop’s relatively steady prices, said Ken Ball, a senior commodity futures adviser at PI Financial in Winnipeg.

“It may have been a late switch by some growers to try and avoid wheat and go back into canola,” he said.

China is the biggest buyer of U.S. soybeans and its threat to respond “forcefully” to U.S. tariffs has sent American grain prices plunging. Chicago wheat futures have tumbled 8.7 percent since the start of May. By comparison, canola futures traded in Canada fell 4.2 percent.

©2018 Bloomberg L.P.

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