It’s crystal clear that the duty charged on American corn sold in Western Canada will make it too expensive for hog producers to use in their rations.
However, the duty’s effect on alternate ingredients such as feed wheat and barley is a little murkier.
In theory, the duty should have a positive impact on feed prices. But analysts say that hog and grain producers will have to wait and see how the market shakes itself out in the next few weeks.
The Canada Customs and Revenue Agency issued a duty of $1.58 (US) per bushel on Nov. 7 in response to a complaint from the Manitoba Corn Growers Association about dumping and subsidizing.
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“The duty blows the price of imported U.S. corn sky-high,” said Mike Jubinville, analyst with Pro Farmer Canada.
The duty increased the price of corn from the United States to $213 per tonne, basis Winnipeg, from $113 per tonne, Jubinville said.
In the short term, the duty will make it hard to evaluate local feed markets, he said. Normally, local barley prices are set relative to the cost of bringing U.S. corn to southern Manitoba.
“We took our benchmark out.”
The duty should help feed prices move higher, but it won’t be the dominant factor in the market, Jubinville said.
“This just adds a small element of supportive feature to it.”
Futures values at the Winnipeg Commodity Exchange rallied hard the day after the duty was announced, but dropped back over the next two days.
Jubinville thinks the loss of U.S. corn supplies will not dramatically raise prices for alternate feed grains.
Canadian feed mills and hog farmers imported only 400,000 tonnes of corn in 1999, which is a pittance compared to the 13 million tonnes of barley grain farmers grew this summer.
Prices will be most affected in southeastern Manitoba, where demand is greatest and supplies of feed grain scant. The region was most affected by fusarium head blight, a cereal disease that produces a toxin that in severe cases leaves the grain unsuitable for livestock.
The duty will create some added demand for feed wheat produced in western Manitoba and eastern Saskatchewan, he said, and may also affect barley and oats prices, but to a lesser
degree.
Feed grain producers with low vomitoxin grain who need immediate cash flow, or who haven’t priced any of their crop yet, should look at local surges in demand as pricing opportunities, Jubinville suggested.
But he said others might want to hold off on selling aggressively until cold weather hits and markets start rolling.
Before the duty, domestic feed wheat had been priced slightly below the Canadian Wheat Board’s pool return outlook for Canada Prairie Spring wheat. In Manitoba, that is about $115 per tonne.
Domestic feed users will now have to challenge those prices to attract feed wheat that might otherwise have gone to the wheat board, Jubinville said.
Extra use of feed wheat may help make a dent in the huge supplies in the countryside, and help lower ending stocks for 2000-01.
All in all, analysts feel lows have been set this fall for feed grain. Feed users have moved away from buying supplies as they need them, and are buying forward to cover more of their long-term needs.
The sheer size of U.S. corn supplies will set limits on how high feed grain prices can move, Jubinville said.
The Starlink corn controversy, and reluctance of corn importers such as Japan and South Korea to buy it, may lead to shrinking U.S. exports and growing corn stocks at the end of the crop year.
As weeks go by, prices will also be limited by farmers’ spring seeding plans. Lagging canola prices may lead farmers to seed another large barley crop, Jubinville said.
