Canada’s ethanol industry is on its way to meeting the federal government’s production goal, but all that progress could be scuttled by a proposed corn duty, says an ethanol enthusiast.
“That will change the dynamics of ethanol plant construction in Eastern Canada for certain,” said Lionel LaBelle, president of the Saskatchewan Ethanol Development Council.
The federal government has set a target of getting ethanol blended into 3.5 percent of all the gasoline sold in Canada by 2010.
If all 11 projects that received funding through the first and second rounds of Ottawa’s $118 million ethanol expansion program bear fruit, it will boost the country’s ethanol capacity to 1.4 billion litres per year, up from the current level of 238 million litres.
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“This is enough ethanol to achieve, two years ahead of schedule, the government’s target,” said a News release
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But LaBelle said only three of those 11 projects are under construction and he doubts whether five proposed plants in Ontario will ever handle a bushel of grain.
“They’re all in jeopardy with this corn countervailing duty issue,” he said.
At the behest of Canadian Corn Producers, the Canada Border Service Agency has launched an investigation that could lead to the imposition of duties on subsidized American corn.
Bliss Baker, vice-president of Commercial Alcohols Inc., a company that intends to build a 200-million-litre ethanol facility in Windsor, Ont., is certain there will be some kind of duty applied to U.S. corn around mid-December.
If the duty is near the $1.50 per bushel the corn growers are asking for, there is no way the Canadian government will meet its ethanol target, he said.
“That would be devastating. It would be highly unlikely we would see any new ethanol plants being developed that would rely on corn,” he said.
The Commercial Alcohols plant will require 20 million bu. of corn a year. A $1.50 per bu. increase in the price of its raw material would add $30 million in annual expenses to the proposed facility.
But Baker is confident that is not going to happen.
While the temporary duty may be substantial, once the Canadian International Trade Tribunal quantifies the extent of injury to Canada’s corn growers, it will be drastically reduced or eliminated altogether, he said.
He anticipates the tribunal will determine that irrigation programs in China have had a more dramatic effect on corn prices than American subsidies.
LaBelle said while a corn duty could deliver a serious blow to Canada’s national ethanol strategy, it may not be such a bad thing for the western Canadian ethanol industry, which uses wheat as the primary crop input.
LaBelle can’t understand why the federal government isn’t developing programs that would encourage the bulk of ethanol production to be located in Western Canada, where 86 percent of the nation’s farmland is located.
“Some would argue that why on earth should we build an ethanol industry in Canada based on American corn? I mean, where’s the long-term strategy there?”
But Baker doesn’t believe that a blow to Eastern Canada’s corn-based ethanol industry would necessarily be a boon to Western Canada’s wheat-based industry.
“I’m not sure there’s a zero sum game here, that if we don’t build, they build. I don’t think that is the case at all.”
