Automatic levy on corn imports is now in action

Yesterday, April 27, the EU imposed an import levy of €5.27/t onto corn, sorghum and rye entering the EU.

The levy was announced as global corn prices continued to fall. One of the main drivers of this fall is the lack of demand for corn for ethanol production as vehicles are not travelling amidst Covid-19 lockdowns.

The last time this levy was implemented was in August 2017 to March 2018. At this time the levy was between €5/t and €10/t.

Yesterday, the European Commission stated: “In light of an ample supply and low prices for maize worldwide, the automatic mechanism calculating import duties was triggered, setting, as of today, import duty on maize, sorghum and rye at €5.27/t.

This will ensure that European producers are not put at a disadvantage in the current market conditions.

The EU has bound duties for all cereals which were set under the GATT [The General Agreement on Tariffs and Trade] agreement. However, for some cereals, such as maize, the applied rates are different to the bound one. This originates from The Blair House Agreement between the US and the EU. It involves setting tariffs on the basis of individual world reference prices for specific cereal types.

According to a statement by the EU: “The duty is fixed on the basis of the difference between the effective EU intervention price for cereals multiplied by 1.55 (€157.03/t) and a representative CIF [cost, insurance and freight] import price for these cereals at the port of Rotterdam.

This mechanism does not leave any margin for neither the level of the duty nor the date of fixing: it is triggered automatically.

Maize in ample supply

Readers of AgriLand‘s Grain Price report’s will know that corn is in ample supply at present. Plantings are expected to be up this year in the US.

A Reuters poll for US crop progress on April 26 showed corn plantings were 22% complete. Up from the United States Department of Agriculture’s (USDA’s) figure of 7% the week before and 2% of the average for the time of year.

April’s World Agricultural Supply and Demand Estimates (WASDE) Report reported that US corn used for ethanol production was lowered 375 million bushels to 5.05 billion as less vehicles are on the road. Ending stocks of US corn were estimated to be raised by 200 million bushels in the report.

Global corn ending stocks were increased in the report to 303.2 million tonnes; that’s an increase of 5.8 million tonnes.

Prices

Low corn prices don’t bode well for Irish grain prices as we’ve seen in recent years when corn was low its popularity has grown. The automatic implementation of this levy in the EU will no doubt be welcome by farmers across the continent.

To give an idea of where prices are at present, yesterday, April 27, Chicago Board of Trade (CBOT) corn for May 2020 dropped in price by 10.25c/bu to 305.50c/bu. To put that into perspective on March 16 that price was at 354.75c/bu.

At the time of publishing, Paris corn stood at €165.50/t for June and €168.75/t for August.

Imports to Ireland

In 2019, 1.54 million tonnes of corn were imported into this country. The majority of these imports – 80% -came from Ukraine, Canada and Brazil.

1.6 million tonnes of maize corn were imported in 2018, while that figure was at 1.1 million tonnes in 2017 and 980,000t in 2016.