November 24, 2005

 

Canada has mixed response on US corn's potential duties
 

 

Potential duties on US corn entering Canada are looking more and more likely but are getting a mixed response from the Canadian agricultural sector.

 

While grain farmers could benefit if Canadian corn and other feed grain prices increase, livestock producers would be paying the higher cost. Corn processors and ethanol companies could also be faced with higher input costs.

 

The Canada Border Services Agency is looking into allegations from the Ontario corn growers that US corn is being dumped into Canada. An announcement on tariffs is expected Dec 15. Recently, the Canadian International Trade Tribunal (CITT) said there is reasonable evidence that unprocessed US corn injures the Canadian sector.

 

Aside from corn growers who will benefit most directly from a duty, feed wheat prices are already seeing some strength due to the potential tariffs, according to western Canadian feed grain brokers.

 

Potential duties on US corn coming into Canada may lead to increased demand for western Canadian feed wheat, said sources.

 

Dave Guichon, president of Ag Value Brokers in Alberta, said the actual impact of a corn duty on Canadian feed grains will depend on the size of the duty and how much of Canada's wheat grades as feed this year. He expected a tariff would make it more economical to move feed wheat from western Canada to Ontario. Manitoba hog producers could also bring in Saskatchewan wheat instead of US corn, Guichon said.

 

Guichon added that the duties would make it a lot cheaper to feed the pigs in the US instead of Canada, which could lead to more hogs moving south for feeding.

 

The Animal Industry Corn Users, or AICU, a group consisting of the Canadian Cattlemen's Association, Canadian Pork Council and Animal Nutrition Association of Canada, have expressed their disappointment in the potential duties, claiming that US corn imports are residual and complementary to Canadian production.

 

"We cannot allow duties to create an imbalance in costs in the integrated North American market," said Canadian Pork Council president Clare Schlegel in an AICU release. "We will lose feeding and finishing to the US-Canadian processing will be lost to the US-and increased exports of young pigs and beef cattle will attract trade actions from US producers," he added.

 

Aside from the feed sector, US corn is also increasingly making its way into Canada to serve the growing ethanol industry. Sources within the sector indicated that higher input costs could limit the growth of ethanol. Depending on the size of the tariff, some existing plants could also see closures, according to sources.

 

Canadian corn processors bringing up US corn could also be hard hit by the duties. London, Ontario, corn sweetener maker Casco has said significant duties could force the company to shut down some of its operations.