August 13, 2007

 

Canada imports of US corn to depend on CWB pool return outlook

 

 

Canada will need to import US corn during the 2007/08 crop year, which runs from August to July, to cover domestic feed and food requirements, market participants said.

 

Just how much will be brought into western Canada will be dependent on what kind of price the Canadian Wheat Board establishes in its Pool Return Outlook for feed barley, the participants said.

 

"Had the removal of barley from the Canadian Wheat Board moved ahead as planned on Aug. 1, there were ideas that 1.0 million metric tonnes of US corn would have been imported by domestic end-users in western Canada," said Mike Jubinville, an analyst with the farmer advisory service ProFarmer Canada.

 

However, with the CWB retaining its barley monopoly powers, the amount of US corn imported into western Canada will be down, since more feed barley remains in western Canada.

 

"How much US corn will be needed will be entirely tied to the price the CWB will set for feed barley exported offshore during 2007/08," Jubinville said.

 

He said if the CWB sets a high price, then barley producers with feed would likely deliver considerable quantities to the CWB instead of the domestic feed sector. However, if the CWB value is set at a very low level, producers will instead deliver barley to the feed sector instead.

 

A cash dealer confirmed: "The opening of the barley market would have definitely created competition for those supplies in western Canada. Just the anticipation of a free market resulted in barley cash bids climbing significantly as both exporters and end-users tried to compete for supplies."

 

The dealer said as barley cash prices climbed, end-users also began to look for alternative feed sources, and the obvious choice was US corn.

 

He confirmed that there was some US corn already booked into western Canada, but details on the amounts were being withheld by importers.

 

Cash bids for feed barley in western Canada have declined back to where end-users are comfortable, Jubinville said.

 

"The margin between feed barley in western Canada and US corn has narrowed significantly given the drop in barley cash bids," Jubinville said.

 

The dealer said US corn was booked into southern Alberta at prices C$10 to C$20 per metric ton lower than feed barley in anticipation that the CWB would lose its monopoly.

 

The CWB is expected to release its Pool Return Outlook estimate for barley as soon as it has a handle on just what kind of sales were made by producers and line companies in western Canada in anticipation of an open market.

 

In its Aug. 9 supply/demand report, Agriculture and Agri-Food Canada estimated US corn imports into all of Canada during 2007-08 would be 1.700 million tonnes, which compares with 2.100 million seen during 2006-07.