Glacier FarmMedia COVID-19 & the Farm

Corn shortfall in East to mean higher U.S. imports

(Resource News International) — An anticipated drop in eastern Canadian corn production is expected to result in higher U.S. corn imports into Canada during the 2008-09 crop years than had been originally forecast, 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 2.1 million tonnes of U.S. corn during the 2007-08 season and 2.2 million during 2008-09. However, the 2007-08 U.S. corn import estimate into Canada was raised 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 from the month-earlier projection was attributed mainly to demand from Eastern Canada improving and to ideas that end users in Western Canada will also continue to purchase U.S. corn to offset high-priced domestic feed rations, said Fred Oleson, chief of the market analysis branch in Winnipeg.

The higher U.S. corn import needs were also associated with domestic corn production in Eastern Canada falling significantly in 2008-09, Oleson said.

“Much of the domestic shortfall in Eastern Canada will be because of the huge winter wheat crop, which came at the expense of corn acreage,” Oleson said. Rising demand for corn for the ethanol sector in Ontario was also cited for the need to bring in supplies from the U.S.

Oleson noted that it was still cheaper to import corn from the U.S. into Eastern Canada than to transfer feed grains from Western Canada.

Stronger than expected demand for U.S. 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 U.S. corn into Western Canada at the end of March had surpassed projections, he said.

At the end of March during the 2007-08 season, Beckman, using Statistics Canada data, said imports of U.S. corn into Alberta were 700,000 tonnes, which would compare with imports of U.S. corn into Alberta for the entire 2006-07 crop year of 160,000 tonnes.

As of March 30, U.S. 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 U.S. corn, which compares with 40,000 for all of 2006-07.

The need for Ontario, meanwhile, to import U.S. corn during the 2007-08 season was down, Beckman said. As of March, Ontario had imported 474,000 tonnes of U.S. 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 favour the east with a 60:40 split.”

While AAFC analysts were expecting U.S. corn imports into Canada to increase, private sector observers were expecting the figure for Western Canada to be a lot lower than what was being projected.

“There is no doubt Eastern Canada will need to boost its imports of U.S. 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.

However, as for Western Canada, end users were expected to switch back to feed wheat and feed barley as an alternative to U.S. 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 saw imports of U.S. corn into Alberta — assuming a normal Canadian Prairie production season — as dropping to next to zero during 2008-09, virtually non-existent in Saskatchewan and only a dribble into Manitoba.

“Part of the switch away from U.S. corn, is that those values are likely to remain extremely high heading into the new crop year,” Frost said.

He said there are already of lot of global importers looking for alternatives.

“South Korea is a prime example,” Frost said, noting that the country, which would normally look to buy U.S. corn, was seeking cheaper global feed wheat.

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