The Rural Voice, 2005-10, Page 50Grain Markets
What the corn countervail could mean
Dave Gordon
is a
commodities
specialist
with LAC,
Inc., Hyde
Park, 519-
473-9333.
By Dave Gordon
Probably the biggest news in
Ontario agriculture occurred in•early
September when the OCPA
announced that Ontario, Quebec and
Manitoba corn producers had filed a
dumping complaint with the
Canadian Border Service Agency
(CBSA).
The producers also asked that
action be taken against the U.S.
regarding the Byrd Amendment and
that Canada file a complaint against
the use of subsidies on corn in the
U.S. at the World Trade Organization
(WTO). But, the action that has
drawn the most attention, is the
request for a countervail duty on corn
imported into Canada. So, I'll try, in
this column, to explain the procedure
and some of the fallout from my
point of view.
There aren't too many grain
traders in Ontario who remember the
countervail duty of 1986. I happen to
be one of them and 1 actually still
have the reports of Canada Customs
and the Canadian International Trade
Tribunal (CITT).
The first thing to realize is that
CBSA announced on September 16
that they had started an investigation
into the dumping complaint'. They
then have 90 days to make a
preliminary decision and determine
the amount of a provisional
countervail duty. CBSA does not
look at any injury that a countervail
duty will cause in Canada, but only at
the question of subsidization in the
U.S. and are they dumping corn for
less than their cost of production. It
sounds pretty simple and I think we
all know the answer. But, CBSA
must make sure that they have
current and reliable data on which to
make a decision.
So, we will probably have to wait
until mid-December for an answer
from the CBSA. But, the question in
many minds is what happens to corn
that is imported between now and
December. The CITT will make the
decision about retroactivity of any
duty but retroactivity is rarely used
and would only be exercised if an
abnormal amount of corn comes in
prior to the mid-December date. In
practical terms, there simply isn't
enough space in Ontario to bring in a
huge amount of corn because the
large processors can only store about
four days of grind and both terminal
and inland elevators are quite full.
The amount of corn imported this fall
will pale in comparison to the fall of
2004 when several vessels and trains
came into Ontario and Quebec.
The CITT also started an
investigation which will parallel that
being done by CBSA. However, the
CITT will receive submissions
regarding injury done to users in
Canada such as hog and beef
producers and industrial users. They
will also look at injury done to corn
producers because of U.S. dumping
and subsidization.
However, time lines for CITT get
a little hazy beyond December.
According to their own schedule they
will release a determination on injury
on November 15 but my
understanding is that CITY may take
several months to make an
announcement and only after a public
interest hearing. At that time. they
can increase or decrease the duty
imposed by CBSA and also
determine if the duty should be
retroactive. And. all of the
representations will happen in the
middle of harvest.
Since the announcement by OCPA
regarding countervail. Ontario
producers have been very reluctant
sellers and as a result. basis levels
have already risen by about 20
cents/bu. However, this countervail
duty will not be the panacea that
many producers are expecting, for a
number of reasons. Firstly. what
happens to the industrial users who
consume only corn and cannot
replace their feed stock with other
grains? Do they mothball their plants
or do they use only U.S. corn and
ship all of their product back to the
U.S.? Or, do they run a plant at a
reduced level to supply product to the
Canadian market. Bottom line is. the
industrial buyers cannot afford to pay
a premium for Ontario corn.
Secondly, the feed manufacturers
can, and will, reduce the amount of
corn in rations if their landed corn
costs is out of line with western feed
grain prices.
Most importantly. hog and beef
producers will be the big losers if
corn prices get out of line. Beef
producers. in particular. will bear the
brunt of higher corn prices since they
need a higher percentage of corn in
the finishing rations. The hog
producer will also feel the pinch of
higher prices. but not to the extent of
the beef guys since some feed wheat
can be used in hog rations.
Think about the scenario - what if
the industrial users mothball their
plants or use all U.S. corn? These
processors represent 80 million
bushels so suddenly there isn't
enough demand t8 use all of the corn
produced in Ontario.
There is only one answer and that
is the introduction of a support
program. Politicians are certainly
shirking their responsibilities in
dealing with this suggestion but it's
time for them to pull their heads out
of the sand. 1 don't see any chance
that the U.S. government will
abandon its farmers by reducing or
dropping support programs. Yes, they
have huge budgetary problems but 1
don't believe U.S. politicians will
leave their constituents high and dry
as Canadian politicians have done. It
seems that U.S. politicians don't
relish unrest among farmers.
Everyone of us must keep the
pressure on our politicians to get this
whole problem solved. A countervail
duty does not increase corn acres in
Ontario and is not a long-term
solution for a healthy corn industry.
The only answer is a long-
term support program covering all
grains.0
OCTOBER 2005 45