We have been focusing a lot on the repercussions of the trade dispute between the United States and China. Agriculture producers in the U.S. are feeling the pinch, especially in the soybean and pork complexes. One thing we may not realize is there is another country’s producers who have been affected as well: Canada.
Audio: World of Agriculture
Soybean futures have dropped quickly since it seemed the United States and China crossed the point of no return in their trade dispute. On July 6th, the U.S. levied tariffs on Chinese goods, and China retaliated. The hardest hit sector in America was agriculture. The value of soybeans has dropped over 20 percent. American soybean producers are very worried, and it turns out so are Canada’s.
The value of Canadian soybeans is affected by the Chicago Board of Trade, just like ours are. The price drops are turning Canadian producers into collateral damage in a trade war between the world’s two largest economies.
One might assume a trade dispute between the United States and China would be good for Canada. After all, they are going to be exporting more of their soybean crop to China without a tariff being involved. This is true on the face of it. However, Canada doesn’t produce near as many soybeans as their American counter-parts. With their price dropping along with ours, they are selling those fewer beans at discounted prices. This is not good news for Canadian producers who struggle with high input costs, just like producers in the United States.
With China looking to reduce the amount of soy it imports next year due to tariffs, it could be an opening for the canola market. With Canada being the world’s largest producer of canola, there could be a silver lining for them yet.