Feedgrain just got more expensive in Canada. Last week, the Canadian Border Services Agency has elected to enact a preliminary duty on unprocessed U.S. corn imports from the United States. Effective immediately, $1.65 (U.S.) per bushel will be added to those imports.

This action is in response to a complaint that corn producers in Ontario, Manitoba and Quebec filed, citing that U.S. corn producers receive subsidizes and export corn at prices below production cost. Two duties are actually imposed-- 58 cents per bushel for dumping (selling below costs) and a $1.07 countervailing duty (to address governmental subsidies).

Final hearings are scheduled for March and April.

These new duties aren't likely to impact U.S. corn prices, but will have a major impact on Canadian corn prices, as well as spillover cost effects on other feedgrains such as wheat and barley. As Ron Plain, University of Missouri ag economist points out, Canada imported 93 million bushels of corn in 2004-- most of which came from the United States. That's actually less than 1 percent of that year's corn crop, but 26 percent of Canada's corn production.

"At $1.65 per bushel, this new duty is likely to stop the movement of unprocessed corn from the United States to Canada," notes Plain. A shortage of 90 million to 100 million bushels of corn in Canada could raise Canadian corn prices by more than $1 per bushel, he adds.

According to the Canadian Pork Council, the new duties could add $20 or more to their producers' cost of producing a slaughter hog.

The catch is that the corn duties will push Canadian producers' breakeven higher, which could put them at risk of U.S. trade action on hogs that they send south.

“This hits Manitoba hog farmers just like a lump of coal in their Christmas stocking," notes a Manitoba Pork Council representative. “When you increase our production cost, you also increase our dumping margin,"  They could end up paying more for corn, then face a trade challenge on live hogs that they export.

As Plain points out, if the duties remain in place for an extended period or if other imports-- corn from China, sorghum, DDGS or complete feed imports-- don't fill the need, then the United States could see feeder pigs and other livestock shipments increase from Canada.

"The Canadian hog industry nearly doubled in size during the past decade," notes Plain. "This new Canadian duty has the potential to make it shrink as fast as it grew."

University of Missouri/ Ron Plain