October 13, 2006

 

Western Canada feed shortage unlikely to spur US corn imports
 

 

Tightening feed supplies in western Canada amid a higher-than-average-quality harvest will not translate into a jump in US corn imports, according to industry sources.

 

"If there was a situation in which western Canadian feed grain prices were to divorce themselves from the trend of the US corn market as it did during the past few years, then I would say there is a possibility of more US corn being brought into western Canada by end-users," Mike Jubinville, an analyst with the farmer advisory service ProFarmer Canada, said. "However, I don't think that will be the case in 2006/07, as US corn prices have also been on the rise."

 

Jubinville said US corn prices have increased significantly over the past month, which has been mirrored by feed grain values in western Canada.

 

"The key to whether US corn will be imported into western Canada will be dependent solely on whether the price for feed wheat becomes extravagant," Glenn Lennox, wheat analyst with the market analysis division of Agriculture and Agri-Food Canada, said.

He added that if the value of feed wheat climbs to a level equal to the price the Canadian Wheat Board is offering for three Canada Western Red Spring wheat, then the hog industry in western Canada would find itself competing with the milling sector.

 

"At that point, they will have to decide which is cheaper," Lennox said. However, he agreed that both wheat and corn values in the US have been rising at the same rate.

 

An estimated 90 percent of western Canada's wheat harvest was expected to grade as No. 2 CWRS or better in 2006/07, Lennox said, leaving very little left over as feed wheat.

 

A dwindling supply of US corn and the continued growth of the ethanol market in the US have already reduced the amount of exportable supplies into Canada, Jubinville noted.

 

He said it was also important to remember that the US has slowly been grinding down its carry-out expectations for corn over the past two years amid the steady demand from ethanol as well as other sectors.

 

"It's conceivable that with the rapid growth in the US ethanol industry, the US may not be in a position to export any corn within a five-year period," Jubinville said. He added that ethanol demand in the US has grown from next to nothing seven years ago to being equal to all of the US exports in terms of corn each season.

 

Jubinville said that with this growing domestic demand for corn, the US might not be in any kind of position to ship the product into Canada.

 

"There will be no economic incentive to bring US corn into western Canada," he said.

 

As for eastern Canada, the situation is a bit different, especially with Ontario in a corn deficit position, Jubinville said.

 

"You have to remember that the ethanol industry is in full swing in Ontario," he said. "I have even heard of a company who was building some offloading facilities in Ontario with the intent of shipping wheat into the US and bringing back US corn."

 

He added that corn was in demand in Ontario, and if there was not enough supply, end-users would bring in supplies from the US.

 

In its September supply/demand outlook, Agriculture and Agri-Food Canada estimated that 2.5 million tonnes of corn would be imported into Canada from the US during the 2006/07 season, which runs from August through July. That would compare with 1.8 million tonnes of US corn imported during 2005/06.

 

The majority of US corn imported was sent to Ontario with some minor amounts going into both Manitoba and Quebec.

 

Jubinville said most of the US corn imports into Manitoba were for the hog industry.

 

"Manitoba's hog sector generally imports about 300,000 tonnes of US corn each crop year," he said.