Corn countervail loses out in a numbers game 

Analysis

By Terry Meagher

Last December, it looked like the U.S. was guilty of dumping corn into Canada. Countervail against American corn was a done deal.

The group tasked with determining injury, the Canada Border Service Agency (CBSA), estimated that U.S. imports depressed a bushel of corn by US$0.82. Subsidies paid to corn farmers in the U.S. added up to 18 per cent of the price of corn from 2003 to September 2005. 

But the numbers can be made to jump through any hoop or used to draw many conclusions. When the Canadain International Trade Tribunal (CITT) finished its hearing in March, it had whittled the damage caused by U.S. corn down to Can$0.82 cents per bushel and said the amount wasn't big enough to worry about. 

The tribunal made much of the fact that the world price of corn was established on the Chicago Commodity Exchange and there was an overwhelming supply of U.S. corn available to Canadian buyers but it failed to consider what the price of corn would be in the U.S. without the subsidy. 

Further, it treated the corn market as a free market when in fact government subsidies in the U.S. distorted the market.

In its report issued in early May, the tribunal argued that the biggest cause of low grain corn prices was the rising dollar. Over the period from 2001-2002 to 2004-2005, annual sales revenue to Canadian corn producers had dropped by Can$60 million and was caused by the exchange rate on the dollar. The loss of sale revenue from American corn was estimated at three per cent of Can$24 million and was based on commercial sales in 2004-2005.

Farmers survived in 2003 and 2004 because the average yield in Canada rose from 106 bushels to 138 bushels. As a consequence, the Canadian industry was able to maintain its sales of 220 million bushels per year and market share of 75 per cent. But the price was lower. 

The report went on to say that during the period of inquiry the U.S. actually decreased, except in 2004 and 2005. Consequently, there has not been an increase in the volume of U.S. corn, So there was no dumping.

The tribunal said it was to explain the gap between the domestic price and the U.S. price when it rose from Can.$0.28 per bushel to Can$0.56 per bushel in 2004-2005. It concluded that because no one proved otherwise the widening of the gap could not be attributed to U.S. corn.

In 2004-205, sales revenue dropped by Can$218million from Can$845 million. The tribunal attributed Can$75million of that to a decline in sales volume. The remaining portion (Can$144 million) was attributed to the lower price of corn, most of which was blamed of the rising Canadian dollar.