China-Canada deal could lift some US feed prices

China on Friday said it would lower the tariff rates applied to a slate of Canadian agriculture products as part of a deal between the two countries. Among the products are canola seeds and meal, which could send U.S. prices skyward and prompt some reshuffling of feed inputs.

During a state visit to Beijing by Canadian Prime Minister Mark Carney on Friday, the two governments announced they had struck a deal to ease recent trade frictions over Chinese electric vehicles.

In return for establishing a tariff-rate quota on electric vehicles, which allows 49,000 Chinese vehicles to enter Canada at a reduced tariff rate each year, Beijing said that beginning in March it will remove some retaliatory tariffs on Canadian canola meal, lobsters, peas and crabs, and ease barriers on other agricultural products, according to a backgrounder from the Canadian government. China will also reduce tariffs on canola seeds.

The U.S. imports around 3.5 million tons of Canadian canola meal annually, Tanner Ehmke, lead economist for grains and oilseeds at CoBank, told Agri-Pulse Friday, with much going into feed for dairy producers in the northern U.S. and California.

If the tariff reductions mean more Canadian canola meal ends up bound for China, Ehmke said it could mean tighter supplies in the U.S. and higher prices.

“It depends upon how much meal Canada really starts shipping to China,” Ehmke said.

He pointed out that China’s hog herd has been shrinking amidst an economic slowdown, which could weigh on demand for additional feed sources.

“It's debatable how much is actually going to move. I'm sure it'll increase, but I don't know if it's going to be a material amount or not,” Ehmke said.

Jenny Wackershauser, a broker at supply chain software and services company Ever.Ag, noted that when China pivoted away from Canadian canola meal last year, cheaper product rushed into the western U.S.

Accordingly, Wackershauser estimates that canola meal prices will strengthen once the deal goes into effect on March 1.

Dairy producers like using canola meal for feed because of the higher fat content compared with other meals, which can improve production and alters the fatty acids in the milk, according to Dellait – an animal nutrition and health company.

But Ehmke said that if canola meal prices shift noticeably, it could prompt some increased demand for soybean meal as an alternative feed input.  

The U.S., he said, is “saturated” with soybean meal. But if demand increases in some concentrated geographies, the deal could have a small impact on some regional soybean meal prices as well.

“This would be, I would say, friendly to soybean meal prices,” Ehmke said.

With the U.S. producing more than 60 million tons of soybean meal a year, however, any impacts on soybean meal markets are likely to be small, Ehmke said.

Don’t miss a beat! It’s easy to sign up for a FREE month of Agri-Pulse news! For the latest on what’s happening in Washington, D.C. and around the country in agriculture, just click here.

Ultimately, the economic impacts of a Canada-China deal for the U.S. may be overshadowed by the geopolitical impacts. Canada has made a concerted effort to diversify trade away from the U.S. since President Donald Trump took office and imposed new tariffs on the country. Carney’s visit to the Chinese capital was an attempt to reset the country’s relationship with China.  

Carney left Beijing hailing “a new strategic partnership” with the Chinese government.

In a post to X, Carney said both countries are “leveraging our strengths — focusing on trade, energy, agriculture, seafood, and other areas where we can make massive gains for both our peoples.”

Meanwhile, high-level talks between the U.S. and Canada remain on pause after Trump lashed out over a televised ad attacking his tariffs bought by the government of Ontario.

Hawaii Democratic Sen. Brian Schatz on Friday called the Canada-China deal a U.S. “foreign policy failure.”

“The most basic principle in politics and geopolitics is loyalty to friends. And we weren’t just disloyal - we were hostile. So here we are,” he wrote in a post to X. “We just got absolutely rolled in this Canada - China deal,” he added.

For his part, Trump was unphased by the deal, telling reporters Friday that it's "a good thing" for Carney.

But U.S. Trade Representative Jamieson Greer believes that Canada will live to regret its dealmaking with Beijing. In an interview with CNBC, Greer said that trading access to the Canadian electric vehicle market for lower tariffs on ag exports would prove costly. 

"There's a reason why we don't sell a lot of Chinese cars in the United States; it’s because we have tariffs to protect American autoworkers and Americans from those vehicles,” he said. "I think in the long run, they're not going to like having made that deal.”

For more news, go to Agri-Pulse.com.