WINNIPEG — Slumping crude oil prices are affecting the Canadian biofuel market and softening demand for corn and soybeans, says Andrea Kent, president of the Canadian Renewable Fuels Association.
Ethanol is traditionally cheaper than gasoline, which encouraged processors to blend more than the mandated amount, she said.
“When you look at low gasoline prices now, that price advantage for ethanol really, really shrinks.”
It means blenders will meet the mandated five percent ethanol requirement but have less incentive to blend at seven or 7.5 percent, which they normally do when it’s financially advantageous, Kent said.
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Biofuel production is a demand driver in the agricultural market because corn is an ingredient in ethanol production and soybeans are used in biodiesel. As a result, reduced demand for biofuel trickles down to the agricultural sector.
“Amid lower oil prices you see that kind of low biofuel use can kind of trickle down and have an impact on the farm level as well,” Kent said.
The impact of reduced opportunistic blending has been mitigated by policies that mandate a certain amount of biofuel use: five percent for ethanol and two percent for biodiesel.
The CRFA is trying to increase the mandate to five percent by 2020.
