Corn Duty

[Vader]

I heard the President of Cargill USA say that if there were enough plants to process all of the US corn into ethanol that todays energy prices would result in a corn price of $3.25 per bushel.

In other words $3.25 per bushel is the energy value of corn relative to crude oil. Lacking that processing capacity and therefore without the link to energy prices, the market surplus of corn has driven prices down to that $1.50 range. Then US farm programs kick in to backfill the deficit with subsidies.

[TOM4CWB]

Cowman;

We had this Discussion at the Alberta Barley Commission Annual Meeting last week.

A close vote just turned down support for the corn countervail duty... one which we as barley growers have no right to vote on that is legally binding... barley is different than corn in the trade agreements.

I would agree with those grain producers who feel hurt... however your question about 2002, is a different matter than today.

Drought induced prices... were very different than today, as are the amount of subsidies which are much higher than today.

Further the CDN$ was close to it's low, which made corn much more expensive in 02-03 ($164/t) 03-04 ($169/t) than it is today (pool B $118/t). The US gov. is spending many times more today, what it spent back 2-3 years ago, on AG subsidies.

THe WTO Brazilian win against USA cotton subsidies opened up a whole raft of actions against the USA Ag. programs...

The CDN Corn action is a simple result of that outcome. The USA knows this.

This corn countervail issue will actually push livestock feeding back to Alberta... as we are still the lowest cost feed grain here of the developed world with the CDN Corn duties in place. Ontario/Quebec and Manitoba/B.C. livestock producers will feel most effect.

THe corn countervail actually cancels out part of the CWB's "single desk" monopoly pool effect of limiting high value exports by innovative CWB "designated area" grain producers.

THis action will certainly burn through our feed wheat surplus at a much higher speed... and bring higher value to all feed grains; IF we can find the capacity within Canada to actually transport the feed to the areas that need it outside AB and SK.

[agstar77]

The trade war has been on along in case you have been sleeping. There has always been one side or the other that has felt put upon. The real problem here is the low price of all feed grain relative to what cost of production is . It is impossible to sell feed grain at these prices without a government subsidy or a farmer funded subsidy. If we are afraid to launch trade challenges , what is the purpose of NAFTA or WTO? Alta. stands to lose if the U.S. retaliates with meat import quotas, that is why they have reluctant to challenge subsidized corn. Well you can't have it both ways, cheap feed and large meat exports, you will destroy the domestic feed producers.

[wedino]

Add to the hurt, those producing ethanol in Eastern Canada.

[lakenheath]

I am not sure what margins feedlots operate on, so how crippling would it be to a feedlot operator (with today's cattle prices) to pay and extra $1.50 a bushel for feed barley. What would that do to their margin? Our feed grain prices are considerably below the cost of production and, I for one, am happy to see the corn duty slapped on. At the same time realizing there could be adverse consiquences down the road.

[craig]

We seem to struggle with this trade challenge issue all the time because we are scared of the consequences for a country so dependent on export trade. The problem has become that the U.S. uses this to their advantage. How can we ever expect to have acceptable trade with the U.S. if we don't stand up for our principles.I continue to point out that if we destroy our local feedgrain production( feed barley in serious jeopardy right now) then can our livestock industry survive on importing all there feed supplies. There is a mutual benefit for both industries to exist together. It seems that we forget that some times.

[Riley]

Its unfortunate that these sorts of issues tend to drive a wedge between grain producers and feed users. While I suppose this is understandable to a certain extent, after all grain producers want as much as they can get for their grain while grain users want as cheap feed supplies as possible, there is one trait that all agricultural producers share, and that is when they are doing well, they put their money in circulation. That economic benefit ripples through the entire rural economy. In my opinion we need both sectors operating at a profit in order to help stem the decay of rural Canada.

However, as to the issue of subsidies, it seems to me that the U.S. sytem of support for grain production subsidizes not only their grain producers but their livestock industry as well, by supply cheap feedgrains. That subsidy also flows into Canada when subsidized corn is trucked across the border. The only one as I see it that is left out in the cold, is the Canadian grain producer.
It was interesting to note that the Canadian Pork Council said as much in one of its press releases. They admitted that grain producers were being forced to sell their product below the cost of production and that perhaps some other way could be found to compensate them rather than imposing duties. In fact they went so far as to suggest that perhaps the Federal government consider adopting a similar system of support for our grain producers as is seen in the U.S.

I also have to agree that if this was strictly a "Western" problem with the current government in power, very little attention would be paid to it. However in vote rich Ontario where many rural riding were decided by extremely narrow margins, it would seem that the plight of both grain and livestock producers might strike a little more resonance with the powers that be especially during an election. What should the government's response be? Do we need to adopt as the CPC suggests...a similar type of government support for grain producers that is available to our U.S. counterparts? If not how do we keep our livestock producers competitive with their biggest competitors (ie U.S.)when grain prices drop below support levels in the U.S.? I look forward to your comments.

[TOM4CWB]

Riley;

The Grain Growers of Canada has been working on the Trade Injury Compensation package for many years.

It is alltogether sad that the feds have not been brave enough to face reality and look after this federal responsibility... trade, and lack of progress to resolve this issue.

Now that grain farmers income is low enough... money starts to flow into this sector... as it is reasonable seeing that feed grain growers are in a bad income position.

Capatilisation of CDN subsidies is not an immediate problem, as this support is neither predictable nor appears to have long term stability. Just as well or land lords/owners of land are the big winners in the USA... from the subsidisation structure there. Some CDNs who own large tracts of land would not agree with me I am sure.

WTO, how does our new system deal with this?

I see foreign aid as a problem more than a solution... my brother sees much of the grain shipped turned into booze/sold/bartered... the only way to get it to hungry women and children is to actually deliver the food in a bowl... and not allow anyone else/the elite/powerbrokers to scoop it away!

What is the solution?

Low priced exports with or without subsidies destroy every nation states ag economy that imports them.

Now if we need a higher price level... how to prevent overproduction... yet 1 billion go to bed hungry each night! The world's poorest people no doubt.

[cowman]

If this American corn subsidy is "green", like some experts say it is, then this Canadian duty is nothing more than a trade harassment, because it will be overturned? America has been playing this game for quite awhile on many products?
Dumping subsidized corn into our feed markets is definitely unfair, but what is the solution? Well one solution would be for our Canadian government to match the subsidy with their own "green" subsidy? The Liberals like to cry poverty but then we see these scandals and boondoggles where billions are stolen or wasted, so how much truth is in this "We are too poor to fight the American/European subsidies"?
As a cow/calf producer I really don't care where my calves are fed out. In 2002 they all went south to the USA...to be fed on that same cheap USA corn that was being fed here! However as someone who has an interest in some barley I saw prices drop from $3.30/bu to $2.80....due entirely to imported corn!
Quite frankly the economics of grain production in Alberta is so poor it is bordering on the ridiculous and often I wonder how we continue to basically work for nothing! But then for the last three years we've been keeping the cows for nothing too!
Feedlots could pay more for feed except for one thing? They have to sell that steer/beef into the American market...which means they have to compete with cheap subsidized corn fed beef. We will never have a level playing field as long as subsidies on grain are unequal?
A duty does not level the playing field, all it does is give the American hog/cattle producer an advantage over his Canadian counterpart? All a duty will do is drive the feeding industry south. The only way to level that playing field, for both the meat producer and grain producer is to match the American subsidy?

[sshiels]

in reply to "Craig" from the 16th...line grain co's are already railing in wheat from AB and northern SK to the Winnipeg market. This is partly why the tariff imposed last week hasn't had the effect that everyone thought it would.

[Zaphod]

Doesn't it seem logical that the main result of this duty will be to push a lot more Cdn weanlings and feeder cattle down into the US where they can eat cheap corn to their heart's content? If that happens, we will see very little impact on consumption of barley, feed wheat or peas.

[TOM4CWB]

Zaphod;

I doubt that this will happen when Capital has been invested in Barns/Infrastructure to feed the animals.

If the feeders go broke... then there will then be a change.

Feeding infrastructure will not likely be built if US duties are in place.

What happens when US Corn is above cost of production, does the US COrn duty get automatically removed? I think not.

THis is a mess... to put it mildly.