June 3, 2008

 

Canada to import more US corn as production drops
   

  

An anticipated drop in eastern Canadian corn production is expected to result in higher US corn imports into Canada during the 2008-09 (August-July) crop years, industry sources said.

 

The Market Analysis Branch of Agriculture and Agri-Food Canada, in its April supply/demand table, had forecast that Canada would import 2.100 million tonnes of US corn during the 2007-08 season and 2.200 million during 2008-09.

 

The 2007-08 figure has since been adjusted to 2.5 million tonnes in the May update. The 2008-09 forecast was also raised to 2.5 million tonnes.

 

The increase in the 2008-09 forecast was attributed mainly to demand from eastern Canada improving and the expectation that end users in western Canada will also continue to purchase US corn to offset high feed prices locally, said Fred Oleson, chief of the market analysis branch.

 

The higher US corn import needs were also due to a significant drop in corn production in eastern Canada in 2008-09, Oleson said.

 

Corn production in eastern Canada fell as farmers planted more winter wheat last season at the expense of corn, Oleson said. Rising demand for corn for the ethanol sector in Ontario also took away corn supplies.

 

Oleson noted that it was still cheaper to import corn from the US into eastern Canada than to transfer feed grains from western Canada.

 

Stronger-than-expected demand for US corn from western Canada accounted for the jump in the 2007-08 forecast, said Chris Beckman, the coarse grains analyst for the Market Analysis Branch.

 

Actual shipments of US corn into western Canada at the end of March had surpassed projections, he said.

 

Canada is importing US corn at a much more rapid clip than before.

 

At the end of March during the 2007-08 season, Beckman, using Statistics Canada data, said imports of US corn into Alberta were 700,000 tonnes, more than four times compared with 160,000 tonnes for the entire 2006-07 crop year.

 

As of March 30, US corn imports into Manitoba were 540,000 tonnes, which would compare with the 2006-07 total of 360,000. Saskatchewan, at the end of March, had brought in 120,000 tonnes of US corn, three times as much for all of 2006-07.

 

However, some provinces are seeing a drop in US corn imports.

 

For example, the need for Ontario to import US corn during the 2007-08 season was down, Beckman said. As of March, Ontario had imported 474,000 tonnes of US corn, compared with 1.1 million for the entire 2006-07 crop year.

 

"The US corn import split ratio for 2007-08 was roughly 30/70 with western Canada accounting for the bigger number," Oleson said. "During 2008-09 that ratio was expected to favor the east with a 60/40 split."

 

While Agriculture Canada analysts expected US corn imports into Canada to increase, private sector individuals expected the figure for western Canada to be a lot lower than projections.

 

"There is no doubt eastern Canada will need to boost its imports of US corn given the domestic production shortfall, livestock requirements and the need to supplement the growing ethanol sector," said Ron Frost, manager of AgProfit, a division of the Pike Management Group in Calgary, Alberta.

 

However, western Canadian end users were expected to switch back to feed wheat and feed barley as alternatives to US corn.

 

"Increased supplies of feed wheat and western barley will once again help make those crops the cheapest alternative for the livestock sector in western Canada," Frost said. Reduced cattle and hog herds in western Canada because of poor profitability were also expected to reduce the demand on feed supplies.

 

Frost expects US corn imports in Alberta to trail off in 2008-09 if Canadian production returns to normal.

 

High US corn prices going into the new crop year would turn away buyers, Frost said, noting that there are already of lot of global importers, such as South Korea, looking for alternatives.