Paul McAuliffe, World Commodity Analysis Corp.
Canada has imposed a corn tariff on U.S. corn ($1.58/bushel) that enters Canada at any point west of the Ontario/Manitoba border. The tariff is reportedly in response to the Canadian view that the United States subsidizes its production of corn, which then is "dumped" in Canada. That country's subsidy concern comes from the loan deficiency payments farmers receive from the U.S. government when prices fall below the loan rate. This past year the LDP payments reached over $6 billion US dollars. Canada believes these subsidies, while not export subsidies, are in fact creating a surplus corn supply, and their market is being used as the dumping ground. Their logic, and evidence of the LDP payments appears sound. What is odd is their view of imposing the tariff only if the corn enters Canada at a point west of Ontario. The map at the end of this article will show where most of the Canadian corn is grown - in Ontario along the Great Lakes, and up farther North into Quebec. Why would Canada care if the corn enters their borders west of Ontario? This "technicality" detracts from their arguments about the U.S. subsidy, and is likely easily circumvented.
Feedlots in the Canadian Prairies (Manitoba, Saskatchewan and Alberta) could import corn from their own major producing areas of Ontario, likely at a cheaper price than the tariff adjusted price of corn from the U.S. Ontario producers would still be able to import U.S. corn, duty free. The winners in this kind of arrangement would likely be the rail and trucking industries that would be moving more corn around than is normal.
The table below shows Canada's corn supply/demand balances for the past several years. The main trend is production, which has been gradually increasing over the past decade, only to find a sharp yield decline in 2000 (the lowest yield since 1993). The crop shortfall will likely force Canadian consumers (industrial users and livestock producers) to increase imports from a normal rate of 700 to 800 tmt/year to 1,300 tmt in 2000.
Canada Corn Supply / Demand TMT Year Area Harvested Yield Production Imports Exports Domestic Use Ending Stocks Feed Use 1990 1062 6.65 7067 522 142 7057 1534 5784 1991 1105 6.71 7413 213 964 6675 1521 5402 1992 857 5.70 4883 1255 200 6209 1250 4835 1993 986 6.59 6501 552 523 7100 680 5600 1994 955 7.38 7043 925 346 7650 652 6050 1995 1003 7.25 7271 855 642 7438 698 5978 1996 1058 6.97 7380 897 300 7650 1025 6150 1997 1011 7.10 7180 1500 200 8600 905 6700 1998 1118 8.01 8952 785 839 8918 885 7047 1999 1150 7.91 9096 691 363 9359 950 7400 2000 1100 6.82 7500 1300 250 9150 350 7200
Having a crop shortfall on top of the import tariff appears to be an excessive burden for their domestic industry. Canada doesn't have enough corn to meet its own needs every year, and now that they have a poor yield, they end up putting a tariff on imports from the United States - but only if it enters the Canadian prairie provinces.
Canadian livestock producers in the prairies will need to feed something else - barley or wheat - both of which are available from this year's recent harvest. Canada uses about 7.2 mmt of wheat for feed purposes in a given year, and they use about 2 mmt of corn for industrial use.
The USDA has forecast Canadian corn imports would increase .6 mmt from last year's levels because of the crop shortfall. This tariff will now threaten part of that increase, or keep the transportation industry busy feeding more Canadian grown corn, while Canadian consumers in Ontario and Quebec import U.S. corn.:
