Bigger Canadian production of corn and soybeans this year stands to backfill a small part of U.S. demand for those crops, after the Midwest drought slashed U.S. production.
Canada is a minor producer of both crops on the global stage. The Midwest drought also extended to Ontario, curtailing potential production of corn and soybeans in the province that is Canada’s biggest grower of each.
But even though volumes are small compared to the billions of bushels harvested annually in the Midwest, nearby Canadian supplies are in a good position to fill part of the U.S. shortfall between supply and demand.
"We’re hoping more go down to the U.S.," said John Pauch, coarse grains analyst at Agriculture and Agri-Food Canada in Winnipeg, adding that more than usual Canadian corn may end up feeding livestock in New York state, Michigan and Pennsylvania, and possibly further south.
Searing summer drought slashed U.S. corn production to the lowest level in six years and soybeans to the lowest in nine years, the U.S. Department of Agriculture forecast on Wednesday, although its corn estimate was larger than expected.
A similar opportunity opened for Canadian corn two years ago.
In 2010-11, Canadian corn showed up as far away as Spain and the Middle East after a poor Ukraine corn crop, Pauch said. To fill demand in the U.S., however, Canadian corn will be competing with supplies from Brazil and elsewhere, he said.
U.S. livestock feeders are likely to import a modestly larger volume of Canadian corn and soybeans, but they should also draw supplies out of the U.S. Northern Plains and ration demand to deal with the drought, said Dax Wedemeyer, broker and analyst at U.S. Commodities in Iowa.
"As you head north, you do have a better crop situation and I think ultimately you may see some (imports from Canada), but we won’t run out. As things go on, we will see rationing."
Canadian soybeans are on course for a record-large 4.4 million-tonne harvest, with corn output looking to reach 11.7 million tonnes, up about nine per cent from last year.
Both crops grow mainly in Quebec and Ontario, and further west in Manitoba.
AAFC sees Canada, which is usually a net importer of corn, exporting 1.2 million tonnes of the grain in 2012-13 for a small trade surplus. Soybean exports look to hit 3.3 million tonnes, according to AAFC’s current outlook.
"There’s such a demand down there for all kinds of commodities that I expect a lot of (Canadian) products,
including soybeans, will be exported into the States to make up for their shortfall," said Chris Beckman, AAFC’s oilseed analyst in Winnipeg.
To be sure, it’s not yet clear how big and of what quality Canada’s corn and soy production will be, with the harvest still underway.
"We have been faced with some pretty variable conditions in Ontario," said Dave Buttenham, secretary-manager of the Canadian Soybean Export Association in Guelph. "Until we can balance our domestic demand with our current exports, it’s hard to validate how aggressive we’re going to be into that global marketplace."
In some parts of the Midwest, the supply situation isn’t so dire, said John Campbell, senior vice-president of the farmer co-operative Ag Processing Inc., which runs nine soybean plants across Iowa, Minnesota, Missouri and Nebraska.
Campbell said it’s unlikely Ag Processing will import Canadian soybeans, but others further east will have to find new sources.
"It’s an international market — (crops) will flow where it makes the most sense."
— Rod Nickel writes for Reuters in Winnipeg.