When Ken Sigurdson speaks, he gets right to the point.
“Ethanol is a feel-good industry that achieves no public policy objective. It’s the most misguided public policy being introduced in Canada,” said Sigurdson, as he opened his presentation at GrainWorld in Winnipeg.
Sigurdson, a farmer from Swan River, Man., and spokesperson for the Save My CWB campaign, was part of a panel discussion on biofuel at the agricultural outlook conference organized by the Canadian Wheat Board.
Joining Sigurdson on the panel were David Rourke, who operates an integrated farm near Minto, Man., and William Lapp, a commodity and economic analyst from Omaha, Nebraska.
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The three attempted to answer the question of whether biofuel make sense under today’s high grain prices.
Sigurdson’s critical opening statement set the tone for his presentation. His answer to the question was simple: biofuel makes no sense at any price.
He referred to studies by U.S. scientists, such as Mark Delucchi of the University of California at Davis, who concluded that soy and corn-based fuels look worse than gasoline and diesel.
Sigurdson also questioned U.S. Department of Agriculture studies that indicate a 20 percent energy gain from corn-based ethanol. He said that study is flawed because it underestimates the inputs required to produce a corn crop.
Following Sigurdson’s presentation, Lapp, who chaired the panel, injected some lightness. He thanked Sigurdson for his words, but advised him not to retire in Iowa.
Rourke presented a more moderate perspective on biofuel. He recently completed construction of a 500,000 litre per year ethanol plant on his 5,000 acre farm. Rourke also finishes 12,000 hogs annually, feeding them straw before they are shipped to market.
This integrated model, where small-scale ethanol production adds to farm income, is a biofuel approach he witnessed in Germany.
“There’s over 600 on-farm ethanol plants in Germany….There is an association and a set of standards,” he said.
Rourke believes biofuel makes the most sense as a low percentage of fuel. A blend of 10 percent ethanol, or two percent biodiesel, helps the environment and increases demand for grain.
“You can’t supply all the gas and diesel fuel in the U.S. and Canada with biodiesel (or ethanol),” said Rourke, who noted that a small percentage of biofuel can improve performance and benefit the environment.
“Going to an E-85, I don’t think is a realistic policy,” he said, commenting on 85 percent ethanol gasoline available at U.S. gas stations.
Rourke’s small-scale plant could be the model for the future because high grain costs, tax increases and overcapacity are crippling the biofuel industry in Germany.
The president of the German renewable fuels association, BBK, told Reuters that the country’s biodiesel industry, capable of producing five million tonnes per year, is operating at 10 percent of its capacity.
BBK sent a letter to the German government last week, asking it to repeal a biofuel tax, imposed Jan. 1, 2008, because it’s killing the fuel at the pump.
“The tax means that biodiesel is now more expensive than fossil diesel,” said BBK president Peter Schrum.
During her oilseed outlook presentation at GrainWorld, Nancy DeVore, a senior economic analyst with grain firm Bunge, said biodiesel plants around the world are also operating well below capacity.She said global biodiesel capacity was 25 million tonnes in 2007-08, but only 8.5 million tonnes were produced.
She was asked how biodiesel plants can operate at a fraction of capacity.
“A lot of them are not. There’s a lot of plants going out of business or shutting down,” said DeVore.
“They can only operate for a short time in negative margins and then you just have to shut down.”
She added that certain U.S. plants continue to operate by shipping fuel into Europe or supplying U.S. states with a biofuel mandate, as in Minnesota and Missouri.
Despite the challenges, Lapp said political support for renewable fuels remains strong in the U.S.
He characterized the mood as a “biofuel pep rally,” and no politician in his right mind wants to “get in the way of that.”
