Canada is expected to import 4.6 million tonnes of American corn this crop year, an increase of about 720,000 tonnes over last year’s record-smashing pace.
That is a good thing for American corn farmers because in other markets they are facing increased competition from China.
Analysts expect China will export 10-12 million tonnes of corn this year, pushing it into second place, ahead of Argentina, the traditional number two exporter in the world.
The United States is the world’s leading corn exporter, moving about 50 million tonnes this year.
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China is using subsidies of up to $40 US per tonne to expand its marketing in Asia and beyond.
In 2002 most Chinese corn went to South Korea, Malaysia and Indonesia.
But now Reuters News Agency reports that American analysts think China will make sales to South Africa, Iran, Egypt and Saudi Arabia, among others.
China’s acceptance into the World Trade Organization was based on restricting its use of export subsidies.
However, China has replaced direct export subsidies with a variety of tax rebates and indirect payments allowing it to offer corn for export below its domestic prices, said the U.S. Department of Agriculture’s Economic Research Service in December.
China’s corn surplus grew to a whopping 101 million tonnes by the end of the 1990s, thanks in part to domestic subsidies that favour corn over soybeans.
Also, demand for feed from the Chinese livestock sector was soft because of poor profits linked to disease and quality problems.
The USDA believes that in the next few years China will see the folly in subsidizing corn production and exports while paying to import large quantities of soybeans.
Also, it expects WTO accession will provide competitive pressures needed to integrate China’s corn and livestock sectors with world markets.
In the meantime, competition from Chinese corn is helping to reduce American corn exports, now running about six percent behind last year.
This, coupled with reduced domestic corn demand from the smaller American livestock herd, has weakened corn prices.
The Chicago March futures contract is now about $2.35 per bushel, down from the early September high of about $2.95.
And that is good news for Canadian livestock feeders forced by drought to buy American corn.
