May 21, 2007

 

High prices of Canadian grain worries importers

 

 

Buyers of Canadian grains, both international and domestic, have started voicing their concern over the rising cost of products as a result of expanding North American ethanol production.

 

Canadian International Grains Institute director of feed Dr. Rex Newkirk said the grains industry has not provided enough volume for livestock and poultry sectors with the booming ethanol industry.

 

Newkirk added soaring corn prices have also driven up of feed alternatives such as barley and feed wheat where livestock and poultry producers have turned to.

 

Saskatchewan Pork Development Board policy analyst Mark Ferguson the last twelve months, prices of hog producer margins have doubled and prices have levelled over the past couple of months.

 

Ferguson said the rise of major ingredients such as cereal grains makes it difficult for a hog producer to keep the ration cost at the same level.

 

Newkirk agrees that while the higher prices are good for grain producers, buyers are worried of sourcing grains for feed alternatives as well as if volume will be enough for all sectors that need crops. He said livestock and poultry sectors locally and abroad fear that grains will be absolutely consumed by ethanol and will push prices further.

 

Ferguson is convinced that it will be new crop that determines where prices are headed for the coming year.

 

He notes ethanol demand is forecast to increase this year which will push industry leaders to seek for more grains or other alternative crops aside from corn and wheat.

 

Ferguson said Ag Canada reports the barley production is forecast to increase by 20 percent due to higher seeded area and yields. Corn production in Canada is forecast to increase by 24 percent this year for ethanol.

 

Perry Mohr, the CEO of the Manitoba Pork Marketing Coop points out producers in the US have adjusted and are looking for seeding more corn in recognition of the opportunity to capitalise on the market which is lucrative.

 

Mohr said good growing conditions and a good crop can alleviate some of the pressure amid the rising Canadian dollar.

 

With the number of ethanol plants projected to be built in the US, Mohr expects demand will be a factor to push through with increased acreage as ethanol priced at US$50 a barrel are certainly to be profitable.

 

He said a good weather will also play a key role.

 

One bright spot for Canadian hog producers is the fact that the demand for feedgrains from ethanol has been much higher in the United States. According to Ferguson, the higher corn price might be relative to some of the western feed grains that could shift its competitive advantages for Canada.

 

Ferguson doesn't expect much change in feedgrain prices over the next few months and he is reluctant to make any predictions further out.