Report finds little biofuel benefit for agriculture

Federal agriculture minister Gerry Ritz uttered a familiar refrain when announcing Ottawa has finalized its biofuel regulations.

“Support for renewable fuels is support for farmers,” he said in a Sept. 1 news release.

Ever since the Conservatives first announced in 2006 they would be mandating the use of renewable fuels, the government has been eager to promote it as a farmer-friendly policy.

“Renewable fuels have the potential to create new markets and economic incentives for Canadian farmers. That is why we have made biofuels development such a high priority,” said Ritz in a 2007 news release announcing the introduction of the Renewable Fuels Bill.

But a cost/benefit analysis accompanying the recent release of the final regulation paints a different picture.

“Overall, the federal renewable fuel requirement is expected to have minimal impacts on the primary agriculture sector and no measurable downstream impacts,” the analysis prepared by Environment Canada said.

Crop sector incomes are expected to rise by a modest 0.7 percent annually because any change in Canadian crop demand generated by ethanol plants would have no significant impact on world prices.

The net negative economic impact on the livestock sector is forecast to be less than that, given feed price increases are expected to be negligible.

“In general, it is expected that the Canadian agriculture sector would be impacted to a greater extent by renewable fuel requirements in other countries, such as the United States,” said Environment Canada in its analysis.

Despite such statements from his government, Ritz anticipates the federal ethanol mandate will deliver substantial farmer benefits when it comes into effect on Dec. 15.

“The long-term growth of the renewable fuels industry will undeniably strengthen the agriculture sector by creating new value-added products and building new renewable fuel facilities in rural locations, driving job growth and economic activity,” he said in an e-mail response toThe Western Producer.

The Canadian Renewable Fuels Association is another group that has consistently touted the agriculture benefits of the looming five percent ethanol mandate.

CRFA president Gordon Quaiattini said the Environment Canada analysis underestimated the impact on the agriculture sector, which is why his association hired a third party firm to conduct its own economic impact assessment.

“It is our belief that some $900 million annually will be the benefit realized by the agriculture sector,” said Quaiattini. “We think that is a more accurate story.”

Al Mussell, senior research associate with the George Morris Centre, also believes the government cost/ benefit analysis was flawed.

But he thinks it grossly underestimates ethanol’s negative impact on Canada’s livestock sector.

He said the government-created demand for ethanol will eventually move Canada from a negative price basis on corn and other feed grains to a positive price basis as it stops exporting feed grains to the United States and starts importing them.

Mussell said feeder animals move across the border based on “nickel and dime” changes to the basis, so there could be a “very significant” downsizing of Canada’s hog and cattle herds as ethanol production ramps up.

“This is not a small matter, as livestock and red meat production are very large scale, export-driven economic activities in Canada,” he wrote in a submission to Environment Canada.

Mussell wonders how the federal government can offer financial assistance to suffering hog farmers and then “whack” them with such a punitive ethanol policy.

He also wonders why Canadian livestock producers are not nearly as outspoken in opposition to ethanol mandates and subsidies as their American counterparts.

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