March 18, 2008

 

Canada's Manitoba to expand corn acres on rising demand

 

 

Manitoba corn growers are expected to respond to strong local demand by increasing corn acres in the province, according to industry sources.

 

Gary Unrau, president of the Manitoba Corn Growers' Association, or MCGA, expects to see roughly 200,000 acres seeded to corn in Manitoba for the 2008-09 (August/July) crop year, higher than the previous year's amount of roughly 175,000 acres.

 

Provincial demand has increased as a result of Husky Energy's (HUSKF) 130-million-litres-per-year ethanol plant in Minnedosa, Manitoba. Although the facility was originally intended to be wheat-based, corn is currently its main feed stock given the rally in feed wheat prices.

 

Raymond Dyck, grain marketing coordinator at the Minnedosa plant, said producers are being offered CAN$6.00 (US$6.03) per bushel for corn delivered to the plant in April, May or June, compared to CAN$7.25 (US$7.28) currently for wheat.

 

"The ethanol plant in Minnedosa has helped demand," Unrau said, adding that most Manitoba corn is grown in the vicinity and at least half the farmers there has supplied corn to the plant. 

 

Demand from other end-users remains strong as well, he said. In fact, Manitoba is a net importer of corn, and Unrau does not anticipate that changing anytime soon.

 

"Manitoba has always been and probably always will be a net importer of corn, especially with the ethanol plant, the Gimli whisky distillery and the livestock industry." Unrau explained.

 

About 99 percent of Manitoba's corn imports come from the US. As such, prices in the province are dictated more by U.S. prices than by local demand.

 

As one of the more heavily subsidised US crops, corn has been a long term problem for Canadian livestock farmers and corn growers: when corn prices are low, the Loan Deficiency Program (LDP) guarantees US corn farmers a minimum price for their corn. This puts a stranglehold on the Canadian side, which does not subsidise its corn programmes.

 

With US corn prices as high as they currently are, Unrau said the playing field has been leveled as subsidies are not required.

 

"This past year we broke a 100-bushel (yield) average in the province, that's pretty good when you start talking C$5.00 or C$6.00 a bushel for corn. That is a profitable industry," Unrau said.

 

Unrau expects to see high prices continue in the near future. Strong prices for soy, high fertilizer costs and crop-rotation requirements will likely cause a small decline in US corn acres, he said. Demand should remain strong as a result and will support higher prices. He noted as well that high corn prices have been a long time coming.

 

"In the last 20 years or so, the industry has taken every little bit of increase that has come along and the farmers have not reaped any of the benefits, so maybe now it is our time," he said. "Our expenses have gone up drastically. Everybody talks about the cost of living going up, but the cost of production has gone up more than the cost of our raw product, so eventually we have to have an adjustment too."