I hope the stories on the front of this week’s markets section do not lead you to believe that we are negative about biofuel development.
Our intention is simply to provide information on the repercussions of a new, potentially huge demand for grain and oilseeds.
Dropping this new fuel submarket into the traditional grain and oilseed market will create a big splash that will rock a lot of boats.
It is hard to know where they will wind up when the waters calm.
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Here are just a few of the waves rippling through the sector:
- Ethanol and biodiesel create new price-supporting demand for grain and oilseeds, but their byproducts create new price-lowering competition for traditional feed ingredients.
- Livestock producers could see biofuel competition raise the price of cereal feed, but increased supply of new feeds like distiller’s grain and oilseed meal could drive down some feed costs.
- Palm oil and increasing supplies of waste animal fat and renderings will present cheap competition to canola in the biodiesel market, but the quality of fuel made from canola oil is superior.
While much is uncertain, several companies have boldly announced investments in the biofuel sector, particularly canola-based biodiesel, in recent days.
Canadian Bioenergy Corp. has plans for a 114 million litre biodiesel plant in Fort Saskatchewan, Alta. Canadian Green Fuels announced a 32 million litre biodiesel plant for Regina.
Advanced Biodiesel Group is working on a 20 million litre or larger plant at Irricana, near Calgary.
There are many more smaller plants of five million litres or less in various states of planning across Western Canada.
Canola-based biodiesel is coming to Canada, but to be successful, these plants must have strong business plans that takes into consideration the changing and sometimes dangerous currents and tides caused by its introduction.
