Feed grain producers got an early Christmas present and livestock feeders got a ticking bomb when the federal government imposed a $1.90 per bushel tariff on imports of U.S. corn.
The impact depends on whether a farm produces feed or uses it, analysts say.
“(Livestock) feeders really should get covered,” said Errol Anderson of Pro Market Communications in Calgary.
“They’ve got a month to six weeks to get covered.”
Many Alberta and Saskatchewan feed producers still have grain in the bin. They will probably see prices increase later in the winter, as feeders work through supplies they built up in anticipation of an import tax.
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Winnipeg feed grain futures prices rose after the duty was announced, but Doug Chambers of Quality Grain in Calgary said the cash market saw little reaction.
The duty was already priced into the commodity.
“Frequently, the unknown is more of an influencing factor than the known,” said Chambers.
“We had some companies and end users doing coverage before this.”
Expectations increase price
Chambers said expectations of a duty likely began pushing up prices in mid-November.
He credits fears of a duty and its reality for an increase of 25 to 40 cents per bushel in feed wheat prices in Alberta.
Feed wheat now costs about $2.50 at the farmgate in areas north of Red Deer.
The prairie market wasn’t shocked by the high level of the duty, Chambers said, because it had already anticipated an amount that would block imports.
“Some guys thought the price would jump, but as one person told me, it doesn’t matter if you’re building a 20 foot tall fence or a 40 foot tall fence. You’re still going to have the same result: nothing gets in,” said Chambers.
“Anything over a buck a bushel US was enough to stop it coming in.”
Anderson said the real shockwaves will be felt in Eastern Canada.
“In Ontario and Quebec it’ll be devastating to their livestock producers,” he said.
“They’ll probably end up bringing up feed wheat from the U.S.”
Canadian Wheat Board spokesperson Maureen Fitzhenry said the corn duty may increase domestic grain demand and that could reduce the size of the board’s export program this year, but will not endanger sales contracts.
“We’ve seen a pretty large volume of deliveries and also future delivery commitments through the guaranteed delivery contracts we’ve put out and that’s going to cover the current firm contracts we’ve got,” she said.
Later in the winter farmers are likely to compare the domestic and export markets before deciding how to market their feed grain.
“Depending on what the prices are like on the export market, it may become more difficult for the wheat board to attract feed deliveries from farmers,” said Fitzhenry.
Manitoba Pork Council chair Karl Kynoch estimates the duty could cost producers $20 per hog.
“That’s the last thing we need,” said Kynoch.
“We’re already at a feed grains disadvantage compared to the U.S. Midwest.”
For Manitoba livestock feeders, who will be the most affected by the duty in Western Canada, the effect will mostly be higher feed costs, not feed shortages.
“There’s lots of feed wheat in Alberta and we can truck it there because the freight still works,” said Anderson.
But there may problems with that assumption too, he said, because getting trucks may be difficult.
“We’ve lost a lot of trucking since BSE. How is the market going to get product over (to Manitoba?) We’re developing a quagmire for ourselves,” said Anderson.
Which is all the more reason for livestock feeders to arrange their winter supplies now, he said.
