There is no shortage of news to report on in agricultural commodity markets. This week, it is shipping fees and Chinese tariffs on Canadian canola products, but importantly, not the seed itself.
At the time of writing, we are nine days away from the implementation of US tariffs, although there are reports that tariffs are still under construction, so no one really knows what countries will be targeted and what levels tariffs will be set at.
The latest curveball thrown into the trade mix is the proposed fees on Chinese-owned or made vessels visiting US ports. The fee is designed to encourage the US or US-owned and made ships.
The US is a big exporter of soybeans to China, totalling over 15 million tonnes last year, along with over 1 million tonnes of wheat and corn. It’s reasonably easy to work out how much the fees would add to the cost of US grains and oilseeds.
The smallest ships carry 30-40,000 tonnes, so a $US1.5 million levy would add $US37-50/t. The largest ships carry 70,000 tonnes, so the cost would come down to $US21.4/t. In our terms, at the current exchange rate, the extra cost would come to $34-80/t depending on vessel size.
US markets didn’t really respond to the announcement as you might expect. There has been plenty of noise from the mining and energy sector about the increase in costs. American farming groups are also watching closely.
An article in the Australian Financial Review has quoted the American Farm Bureau Federation as saying the potential fees have restricted their ability to bulk commodities past May as they can’t secure ocean freight. Figure 1 shows this isn’t showing up in futures markets yet, with the CME SRW wheat curve still factoring in the cost of carry on Friday.
The corn forward curve is much flatter, but it is not unusual for harvest months to be discounted on the corn curve.
Australian wheat prices have remained somewhat immune to the trade issues, with ASX Wheat Futures tracking along between $330 and $350/t for much of the first quarter of 2025 (figure 1). An increase in the cost of US wheat would be beneficial for our prices, as it would drive demand to other exporters.
Canola has seen some benefit from the Chinese tariffs on Canadian canola oil and meal, while seed is still tariff-free. Figure 3 shows canola prices lifting at Geelong last week, despite further falls in Canadian and French futures contracts.
What does it mean?
Those who don’t mind risk would be selling US wheat, corn and soybean futures and holding Australian wheat, barley or canola, and trading the spread. However, as we have seen before, the tariffs or trade restrictions can be quickly reversed.
Key Points
- The latest trade disruptions include a proposed levy on Chinese ships in US ports.
- Such a levy would add significant costs to the price of US commodities.
- This would be beneficial for grain and oilseed prices if implemented.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: MLA, AFR, CBOT, USDA, Mecardo
