WINNIPEG — Current efforts by U.S. farmers to keep Canadian durum out of their marketplace are baffling in light of the fact that durum bins in that country are almost empty.
For the second year in a row, the U.S. is shorting its own market in a bid to push competitors such as Canada out of the world market.
Current trade estimates show the U.S. has sold 700,000 tonnes more than it can access domestically. “More importantly, they’ve shorted it on quality too,” said Lorne Hehn, chief commissioner of the Canadian Wheat Board.
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After last year’s harvest, the U.S. had 3.2 million tonnes of durum. But effectively, it can only access about 2.8 million tonnes because it is virtually impossible to draw the last 400,000 to 500,000 tonnes of grain out of the system, Hehn said.
The U.S. has targeted exports of 1.4 million tonnes and has already confirmed sales for 1.1 million tonnes. It expects to use 2.1 million tonnes domestically.
So from a total supply of 2.8 million tonnes, “the total disposal will be 3.5 million tonnes. Is it any wonder Canada is selling durum to the U.S.,” Hehn said.
Even if no import restrictions are imposed, U.S. processors are expecting a severe shortage of milling durum from May through August.
U.S. farmers blame Canadian durum imports for keeping a lid on their prices. Cash price for durum in Minneapolis is trading between $6.80 -$7.50 (U.S.).
But the most amazing aspect of the scenario to Hehn is that all the durum exported from the U.S. this year has been subsidized by the Export Enhancement Program (EEP).
“They’ve done that knowing full well that Canada is really the only competitor in the marketplace,” he said. Supplies of durum in the European Union are so tight, it’s applied an export tax to keep existing supplies at home.
Hehn told a farmers’ meeting in Oak Bluff, Man. last week the U.S. department of agriculture acts like a wheat board, except that it operates without deference to supply and demand fundamentals.
And he’s under no illusions that the EEP is an offshoot of the trade war between the U.S. and the European Union: “It’s now between Canada and the U.S. as well.”
Canadian farmers, who export 85 percent of their production, are exposed. Only about 25 percent of their exports can move into unsubsidized markets, one of which is the U.S.
“We have to compete as your selling arm with those discounts,” Hehn said.
