SASKATOON — While Canadian flour millers were happy to escape the cap on wheat exports to the U.S., they don’t expect a bonanza of new cross-border sales.
Exports to the U.S. have increased dramatically in the past two years, climbing from less than 18,000 tonnes two years ago to around 125,000 tonnes in 1993-94.
But Canada’s millers are now operating at 92 percent of capacity and couldn’t jack up sales to the U.S. any further even if they wanted to, say industry officials.
“We probably are coming close to producing all we can in this country and we are probably exporting very close to all we can,” said Gordon Harrison, president of the Canadian National Millers Association.
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Quota on wheat, durum
During recent negotiations on cross-border wheat trade, some U.S. interests pressed for quotas on wheat and durum flour, fearing Canada could circumvent quotas on raw grain by shipping flour instead.
But the association launched a vigorous lobbying campaign and, working alongside the federal government, managed to convince the Americans that wouldn’t happen and quotas were uncalled for.
“Nobody is going to run out and spend $30 million or $40 million to build a big new mill to test the agreement,” said one industry source who asked not to be named.
With the passage of the Canada/U.S. Free Trade Agreement, the Canadian and American flour markets began to integrate. A series of take-overs and mergers in the last few years have resulted in 75 percent of the production capacity of CNMA member firms being owned by U.S. companies.
As Canadian millers were squeezed out of overseas markets by subsidized competition from the U.S. and Europe, they began to look south of the border.
“In the last two years, you’ve got an open border, a free trade agreement and traditional markets made inaccessible because of subsidies,” said Harrison. “What are you going to do? You’re going to try to sell into the biggest market in the world that happens to be right next door.”
And they quickly found customers ready to buy Canadian flour in order to obtain particular quality characteristics.
Even at their new levels, Canada’s flour sales to the U.S. represent only 0.4 percent of U.S. flour production and the association says they will never surpass 0.5 percent. In addition, Canada remains a net importer of flour-based wheat products like biscuits and pasta.
