Dalian rapeseed, pork futures rise as Beijing imposes tariffs on Canadian goods

Rapeseed meal and rapeseed oil futures on China's Dalian Commodity Exchange surged March 10 after Beijing announced steep tariffs on key Canadian agricultural products over the weekend.

China's tariffs will be effective from March 20 and include a 100% levy on Canadian rapeseed oil, oil cakes and peas, as well as a 25% duty on its aquatic products and pork.

The move, announced by China's State Council Tariff Commission on March 8, is seen as retaliation against Ottawa's 2024 trade restrictions on Chinese electric vehicles, steel and aluminum.

May rapeseed meal futures on DCE soared 6% to close at Yuan 2,611/mt ($360/mt) on March 10.

May rapeseed oil futures surged 5% to Yuan 9,204/mt, while May soybean meal futures gained 1.2% to Yuan 2,937/mt.

May hog futures on DCE closed 0.15% higher at Yuan 13,415/mt.

Trade tensions rise

Trade tensions have escalated amid broader global concerns over China's growing dominance in key industrial sectors, with Canada aligning its policy with US and EU moves against Chinese subsidies and dumping practices.

Canada announced a 100% duty on Chinese EVs and a 25% duty on steel and aluminum imports in August 2024.

China, the world's largest consumer of soybeans and canola, heavily relies on oilseeds for its livestock industry, crushing them into meal and vegetable oil for animal feed.

According to the US Department of Agriculture, in 2023, China imported about 99.41 million mt of soybeans, accounting for about 65% of the global volume of 153.09 million mt. That year, China is estimated to have bought 10.2 million mt of canola, accounting for about 60% of the global 17 million mt volume.

Canada, the world's leading exporter of canola, had about 4.6 million mt or $3.47 billion of outflows to China in 2023.

While rapeseed itself is not subject to tariffs, the duties on its processed products -- meal and oil -- have triggered volatility in the oilseed markets.

"The markets are currently driven by emotions, which may result in a limited actual impact," said a market source. "We can see rapeseed purchased directly instead of its crushed product in the future."

Analysts expect China to seek alternative sources for rapeseed products.

"China has alternative origins for rapeseed oil, such as Russia and the EU," said Anilkumar Bagani, research head at Mumbai-based vegetable oil broker Sunvin Group.

"The Chinese import duty hike could pressure Canadian canola prices, resulting in a sharp decline," Bagani said. "It also needs to be noted that China has huge rapeseed oil stocks at the moment, and crush capacity utilization is also considerably high."

Another market participant noted that China might consider Russia, Mongolia, Kazakhstan, Ukraine and South America for alternative rapeseed product supplies.

Agricultural trade implications

Market participants are closely monitoring whether Canada will pursue negotiations with China or implement additional trade restrictions. Currently, traders expect continued volatility in rapeseed meal and oil futures, which could potentially have ripple effects on the broader oilseed market.

This is not the first time China has targeted Canadian canola. From March 2019 to May 2022, China maintained a ban on canola seed imports from two major Canadian firms.

The Canadian Canola Council, citing an analysis, pegged lost sales from that ban at around $1 billion to $2 billion by August 2020.

Amid ongoing geopolitical tensions, Canadian exporters might explore alternative markets, whereas China is poised to diversify its import sources in response to Western trade restrictions.

In May 2024, the Biden administration raised tariffs on Chinese EVs to 100% and added duties on steel, aluminum, and semiconductors. Starting January 2025, the Trump administration imposed a 10% tariff on all Chinese goods, with possible increases. The EU, after an antisubsidy investigation, set tariffs on Chinese EVs from 7.8% to 35.3%, effective November 2024 for five years, and introduced antidumping duties on Chinese brandy.

China has announced retaliatory tariffs, including 15% duties on US coal and LNG, and has targeted $21 billion worth of US agricultural and food products, while launching antidumping investigations into major European food products.

Market sources said Australia could benefit from the reshuffling of global trade flows.

"Chinese tariffs on US goods may eventually translate into more support for Australian grains and beef," an industry expert said. "On the grain side, imports are likely to pick up later in the year when stocks start running lower."

Platts, part of S&P Global Commodity Insights, assessed 90CL beef FCA Australia at $6,401/mt on March 10, rising $13/mt from the previous session.

Meanwhile, the industry expert says demand for Australian canola in Asia and Europe could weaken if more Canadian canola is available in those markets.

The impact on pork, however, is expected to be limited. "Pork is not much affected as most of the demand can be met by local production [in China]," a market source said, noting that the country's pork imports have been declining.