China tariff deal eases pressure but Canadian canola still exposed, report says
A new University of Calgary analysis says canola remains heavily reliant on China and the US, limiting diversification despite a recent tariff deal with China.
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By Torontoer Staff
A recent agreement with China to reduce tariffs on Canadian canola offers relief for producers, but new research warns the crop remains highly vulnerable. The Simpson Centre for Food and Agricultural Policy at the University of Calgary finds that China and the United States together take nearly 90 per cent of Canadian canola exports, leaving few realistic alternatives.
The paper, released earlier this month, says structural barriers prevent Canada from shifting large volumes to other markets or processing more product at home. That leaves the industry exposed to retaliation, policy shifts and bottlenecks in the supply chain despite the short-term gains from the China deal.
Market concentration and the risk it creates
Lead researcher Farzana Shirin, an agricultural economist at the University of Calgary, warns that heavy reliance on two markets keeps the sector fragile. "We don’t want to have the same market concentration and keep the sector vulnerable to retaliatory tariffs or trade policy changes," she said.
The report breaks down exports by product. The United States is the largest customer for canola oil, followed by Mexico and China. For seed, China is the biggest importer, followed by Japan and Mexico. That pattern means Canada is especially exposed if diplomatic or trade conditions change with either major buyer.
Barriers limiting market diversification
The paper identifies several concrete obstacles that make it difficult to redirect Canadian canola to other destinations. Key among them are regulatory restrictions, processing capacity limits abroad, and domestic infrastructure designed for seed exports rather than oil.
- European Union rules restrict genetically modified crops, effectively blocking most Canadian canola seed because the bulk of Canadian canola is GM.
- Many potential importers lack the crushers needed to turn seed into oil at scale.
- Canadian export facilities and transport networks are optimized for seed shipments, not bulk deliveries of processed oil.
Shirin says those constraints mean market development is not simply a matter of choosing new buyers. "You can’t just pick a market and decide to go for that as other barriers are in place," she said.
Processing, infrastructure and the biofuel opportunity
The report argues that increasing domestic oil processing capacity and building more crushers would help Canada capture higher-value parts of the canola chain, and open access to markets that will not accept genetically modified seed but will accept oil for non-food uses.
Shirin notes biofuels represent a growing demand source that aligns with boosting domestic capacity. "That’s one new market that also aligns with the push for domestic capacity building and production of oil, as opposed to focusing on the seed and seed exports," she said.
Industry plans to expand crushing capacity have faced setbacks. The paper notes several proposed facilities in Saskatchewan were delayed or cancelled because of higher costs and economic uncertainty, limiting Canada’s ability to pivot toward oil exports.
Industry and policy responses
The tariff changes with China followed a meeting between Prime Minister Mark Carney and President Xi Jinping. The deal reduces Chinese duties on Canadian canola seed and temporarily removes tariffs on canola meal in exchange for concessions from Canada on other trade issues.
Rick White, president of the Canadian Canola Growers Association, called for regulatory adjustments to allow more domestic use of Canadian canola in biofuels. "We have to be a little more selfish and not be importing other stuff instead of canola," he said, arguing existing Canadian biofuel capacity could use more homegrown oil.
The Simpson Centre paper recommends targeted investments in crushing facilities, upgrades to export infrastructure to handle processed oil, and policy changes that would encourage domestic processing and biofuel use. Those steps aim to reduce market concentration and improve resilience.
What this means for producers
For Prairie farmers, the China tariff rollback provides immediate relief, particularly for producers in southern Alberta who have seen supply-chain disruptions and tariff-related uncertainty. But the research stresses that relief is temporary unless Canada addresses the deeper structural issues the report highlights.
Expanding domestic processing, resolving transport bottlenecks and pursuing market diversification will require coordinated action from industry and government, and likely a multi-year effort. Without that, the sector remains concentrated and more easily affected by future trade disputes or policy shifts.
The Simpson Centre study serves as a reminder that trade deals can reduce immediate risks, but they do not erase the need for long-term investments and regulatory changes to broaden market access and add value at home.
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