An upward trend

CORN EXPORTS TO the European Union will reach 1.5 million tonnes in 2018. Experts attribute the increased demand to the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU, which abolished duties on corn imports. Analysts expect further growth as Europe battles one of the worst droughts on record.

Corn exports from Ontario, which have been trending upwards for the past few years, rose dramatically last year, especially over the winter. The current marketing year, which starts on August 1 and ends July 31, has seen around 1.15-million tonnes exported to the EU. Currently, the EU is the largest export market for Canadian corn, says Grain Farmers of Ontario federal government liaison Gord Pugh.

“Exports to the U.S. have declined over the past three years,” he says.

The three big markets within the EU are Ireland, Spain, and Portugal, which account for approximately 80 per cent of corn exports, Pugh estimates, pointing to the EU’s livestock market as the likely cause of the growth. Ireland is one of the biggest cattle producers in the EU, Spain is the largest pork producer, and Portugal has a healthy livestock industry, although it’s possible that the latter country is just the point of entry.

DUTIES REMOVED

Some of what aided in the development of the market was the implementation of CETA last September. Before CETA, the EU had a duty on corn imports.

“The EU has a variable levy system on a lot of grains,” Pugh explains. “So if the world price, which is basically the landed U.S. price, falls below 155 per cent of the intervention price in the EU — about €155/ tonne (CAD$255/ tonne) in Rotterdam — then the difference is applied as a duty.”

In fall 2017, that duty amounted to as much as €10/tonne (CAD$15/tonne), says Pugh. But once CETA kicked in, the duty was eliminated entirely. “That gave us a huge advantage — just as our crop was coming off — and carried through most of the winter,” he says.

EU duties on U.S. corn have also driven Canada’s export market.

“They put on a 25 per cent duty in June as part of the retaliation for the steel and aluminum tariffs,” Pugh explains. “And that will greatly assist our exports as our crop comes off, assuming that there’s no resolution of that dispute between the EU and the U.S. before then.”

“But I don’t think there will be,” he adds.

INCREASED DEMAND

Sergio Novelli, Agriculture and Agri-Food Canada’s corn sector specialist, says two trends are driving corn demand in the EU: feed for livestock and ethanol production. EU production, he says, is barely keeping pace with their needs.

Industrial use is expected to increase by more than 900,000 tonnes, says Novelli. While current oil prices are fairly low, if they return to $100/ barrel we can expect to see increased exports for industrial use. “It all depends on some of the policies,” he says.

With regards to livestock feed, Statistics Canada reports that corn exports to Spain alone have reached 285,000 tonnes in 2018, up from 187,000 tonnes in 2017. Novelli attributes this growth to a decline in domestic supply.

EU exports are expected to continue, especially given the impact of this year’s continent-wide drought. Yields, he says, are expected to be down in Russia, which means they will be exporting less. On the export front, Ukraine is doing well this year but will have lower exports by about one million tonnes. Russian exports, however, are down from 5.38 million to 4.6 million tonnes.

The drought is already impacting Canadian corn exports. “It’s already showing up in our stats for 2018,” Novelli says. “It seems like it’s a developed market. We developed marketing channels with EU buyers, and we will probably continue exporting corn, provided we’ve got the production.”

While yields and production are increasing across Canada, Novelli says we are keeping a lot of what we produce for domestic use. “We only export somewhere around 1.5 million tonnes of corn, so it’s not a massive amount,” he says. “Out of a forecasted 14.5 million tonne crop, we’ll export 1.4 million. It’s not like wheat, which is massive at 22.3 million.”

In the 2017–2018 crop year, Canada exported 1.8 million tonnes of corn to the EU. In 2018–2019, experts forecast 1.5 million tonnes in exports. In 1999–2000, corn exports reached just 226,000 tonnes. The record was in 2013–2014 when Canada exported almost two million tonnes. For the most part, corn for export is produced in Ontario and Quebec.

Looking forward, Novelli anticipates that exports to the EU will continue. In future though, he expects some of the Eastern European production to pick up pace.

“The yields in some of the Eastern European countries are a little on the lower side,” he says. “They’re more like five metric tonnes per hectare whereas we are about 10.”

“Romania is a pretty big corn grower,” he says. “We’ll probably see improvements in yields there down the road.”

“There are so many factors that come into play in terms of the export picture,” Novelli concludes. •