Up until a just few years ago, it was practically unthinkable that corn could be grown in the Canadian prairies. Now, the production of America’s most common grain is facing growing competition from our unusually fertile northern neighbor…
In the U.S., corn production has largely been dominated by America’s Midwest. The famous Corn Belt stretches from the Ohio River valley to Nebraska before tailing off into northern Minnesota.
But after the Corn Belt suffered a severe drought in 2012 – the worst in 5 decades – the resulting financial devastation shook up the industry.
A traditionally strong and consistent crop such as corn, was suddenly risky. And the sheer unpredictable nature of harvests from year to year has presented a significant challenge to growers.
Even though corn production rebounded dramatically in 2013 to a record 13.9 billion bushels, severe winter conditions that swept across the country recently could potentially have a negative impact on production in 2014.
As a result, farmers have already begun planting other crops.
“These changes are happening faster than plants can adapt, so we will see substantial impacts on global growing patterns,” said Axel Schmidt, a former senior scientist for the International Center for Tropical Agriculture.
And one of the major changes is the migration of corn production to the north.
A Boom In Canadian Corn
Where farmers in places like Kansas are planting fewer cornfields in favor of less-thirsty crops such as wheat and sorghum, corn production in the Canadian prairies and Central Canada (Ontario and Quebec) have skyrocketed in the last few years due to more seasonable weather.
Also helping Canadian farm production is that temperatures in the region are slated to rise as well. Researchers at the University of Winnipeg estimate that the mean annual temperature will rise by as much as 5 degrees Fahrenheit by 2050.
That’s on top of a shift over the last fifty years that’s seen the average growing season for grains in Canada’s breadbasket increase by two invaluable weeks.
Danny Blair of the University of Winnipeg stated that “The [Canadian] winters have warmed and shortened dramatically, accompanied by more rainfall that allows for earlier planting and greater soil moisture that helps crops.”
These favorable conditions have helped shift the focus of corn production up north. Canadian farmers sowed a record 405,000 acres of corn in Manitoba, Saskatchewan, and Alberta last year, double the amount two years earlier and almost eight times what it was 20 years ago.
Though the amount is a mere sliver of the estimated 95.4 million acres sown in the U.S. last year, the vast amount of potential corn acreage to the north is simply too massive to ignore.
Technology has also contributed to the fertility of Canada’s breadbasket.
According to Bloomberg, a warming climate and the development of faster-maturing seed varieties have allowed Canadian farmers to introduce and increase production in recent years.
In total, Canada produced more than 550 million bushels of corn in 2013.
And as a direct result of the supply boom, Canadians are importing much less corn. According to US data, corn imports from the U.S. fell to $113.7 million in 2013, less than one-quarter the level of five years ago.
Yet this is still cheaper than the premium that US farmers pay for land, which was roughly $2,650 an acre in 2012.
Inevitably, the subsequently higher margins farmers are getting for corn output has made Canada an attractive target for agribusinesses.
Of course, there still are some skeptics.
For example, climate change advocates argue that a shift in weather patterns over the last few years doesn’t guarantee long-term prosperity.
And while Canadian weather is trending towards the warmer side, the city of Winnipeg just experienced its coldest winter since 1979.
But at the end of the day, the sheer size of this potential growth story is just too large to ignore. And now several large conglomerates are seizing the opportunity to stake a foothold in the Canadian corn business.
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Two big players with their eyes set on the Canadian prairies are seed makers Monsanto Co. (NYSE:MON) and DuPont Co. (NYSE:DD).
Monsanto has estimated that the amount of land devoted to corn in the western provinces (including British Columbia) could increase 20-fold by 2025.
As such, the companies have beefed up their presence in the region by investing more than $100 million in new R&D staff and hosting of agriculture conferences to educate Canadian farmers on how to maximize corn output.
Pioneer, DuPont’s seed division, has doubled its staff in western Canada since 2008 and like Monsanto, has increased technical support for farmers experimenting with new products.
Monsanto and DuPont are convinced that there is a very bright future ahead for corn production in Canada.
Though the new Canadian Corn Belt won’t take over the US Corn Belt anytime soon, these companies are betting that the Canadian market share will continue to grow at a very brisk pace.
At less than 4% of the size of the US market, there could be an incredible opportunity shaping up in Canada.
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