WINNIPEG/CHICAGO, Ill. (Reuters) — Canadian corn is flowing to U.S. ethanol plants and feed suppliers in larger than usual volumes this year.
Up to one million tonnes are expected in 2012-13 as a large Ontario crop backfills demand after last year’s severe U.S. drought.
Canada is normally a net importer of corn, feeding Eastern Canada’s pigs and poultry and supplying Ontario ethanol plants. But the worst U.S. drought in more than 50 years has forced buyers to look north.
“Ontario had not a lot of rain last year, but it was timed almost perfectly, so we had the biggest corn crop in history in Ontario in 2012,” said Steve Kell, grain merchant at Parrish & Heimbecker.
“It’s just a natural redistribution. And it’s moving.”
Ontario accounted for two-thirds of Canada’s 13.1 million tonne corn harvest. Kell expects more than one million tonnes of Ontario corn to move into the United States in 2012-13, and maybe more if there are U.S. corn planting delays.
That would be the second-biggest Canadian corn export program on record, after nearly 1.7 million tonnes were shipped two years earlier following a poor coarse grain harvest in Europe.
Agriculture Canada expects Canadian corn exports to more than double in 2012-13 to one million tonnes from the previous year.
The U.S. Department of Agriculture increased its corn import forecast this month to 125 million bushels, the highest on record and up from an estimated 29 million bu. in the 2011-12 marketing year.
Nearby corn futures on the Chicago Board of Trade have pulled well back from the record high they set in August but are still 12 percent higher year over year.
U.S. corn imports from Canada are not unusual, although the amounts this year are.
“Mostly it’s just small domestic rail shipments. It’s mostly for feed, kind of the same path it always takes, showing up in Ohio and a few other places,” said one U.S. grain exporter.
“Corn has been on pace to reach the USDA’s import number.”
Canadian exporters say Ontario corn is flowing into Michigan and New York ethanol plants in particular. The Great Lakes will open for navigation later this month, and there has been increased movement of corn to terminals on the lakes to prepare for transport by ship, Kell said.
Once ship traffic begins, Canadian corn can more easily reach markets such as Toledo, Ohio.
P&H has five grain terminals on the Great Lakes in Ontario, and three of those, at Goderich, Hamilton and Owen Sound, are actively moving Canadian corn, he said.
It’s unlikely that Canadian supplies are weakening U.S. corn basis levels much, said Lynne Cohoe, owner of Homeland Grain Inc., a grain dealer at Burgessville, Ont. The company has consistently shipped most of its corn sales into the U.S. for the past two months.
Still, the influx of Canadian corn had kept a lid on basis in the closely watched Toledo market and could continue to anchor values once lakes shipping resumes.
The corn basis bid at a major grain company’s Toledo terminal recently eased by five cents a bushel to the lowest level in nearly a month, largely due to a wave of U.S. farmer selling of old-crop corn.
Canadian supplies come to the United States with additional freight costs, as well as extra time and paperwork to cross the border.
“Obviously, our basis is considerably lower than in the U.S. and that’s why (corn) is going there,” Cohoe said. “It’s a benefit for everybody right down to the producer because it’s certainly raising basis bids in Ontario, or at least keeping them from going lower.”
Agriculture Canada expects Canadian corn plantings for 2013-14 to ease slightly to 3.5 million acres, but brisk exports may tempt farmers to sow more acres.
“It says that we can produce more and move it,” she said.
“People have confidence that the market is a lot deeper than people thought it was before.”
Parts of the southern U.S. Plains have also seen intense drought, but Canadian shipments of soft red winter wheat from Ontario have been modest, Kell said.