Manitoba’s plans to massively expand ethanol production are based on a
very big “if,” says one economist who has studied the issue.
A Manitoba ethanol industry that is forced to import feed grain will
have trouble competing against ethanol from Saskatchewan and Minnesota,
where feed grain is not in short supply, said University of Manitoba
agricultural economist Daryl Kraft.
“If you’re a net importer, half of the time your cost structure is
higher than that of your neighbouring states and provinces, which are
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producing ethanol with their own domestic grains,” said Kraft.
He presented his concerns to the Ethanol Advisory Panel of the Manitoba
government.
“Saskatchewan should be a lower cost producer than Manitoba most of the
time.”
The panel released a report Dec. 11 in which it called for the
provincial and federal governments to increase tax breaks for ethanol
production and for the provincial government to make 85 percent of the
province’s gasoline sales include 10 percent ethanol by late 2005.
These and other steps will help Manitoba establish a number of ethanol
plants, the panel said, which will encourage rural economic
development. Locally owned ethanol plants will provide distiller’s
grain for livestock operations, a cleaner source of energy than
petroleum products and jobs in rural communities, the panel said.
It said ethanol plants would probably rely on feed wheat and
acknowledged that feed wheat is in hot demand by livestock producers
already. Fusarium has made a lot of Manitoba feed wheat unusable by
livestock feeders, and feed wheat production is significantly smaller
than it was a few years ago, the panel said. But it did not see these
factors as obstructing ethanol development.
The panel said if varieties of high-yielding feed wheat not susceptible
to fusarium can be developed, farmers would start growing more of it.
The slump in feed wheat production in recent years shows there is
potential for increasing wheat acres to past levels.
“As recently as 1992, Manitoba farmers cultivated approximately two
million more acres of wheat than they do today,” said the panel’s
report.
“This is a strong indication that Manitoba farmers have the capacity to
produce sufficient quantities of wheat to meet the growing demand for
both the livestock and ethanol industries in Manitoba.”
But Kraft said this potential increase is based upon scientists
developing fusarium-resistant forms of feed wheat that have a big
enough yield advantage to compensate for lower per bushel prices than
for milling wheat.
“That’s easier said than done,” he said.
“You’re going to have to develop a Canadian western spring type variety
that yields 20 to 25 percent more than red spring and is resistant to
fusarium.”
If ethanol plants were built before such varieties were widely
available, Manitoba ethanol plants might find themselves importing U.S.
corn or Saskatchewan feed wheat six out of 10 years. Manitoba now
imports feed wheat three out of 10 years on average.
That would make feed grain supplies here more expensive on average than
in competing areas.
“I’m not saying that it’s not possible to develop,” said Kraft. “But I
think it’s going to be more difficult than if you followed the same
plans in Saskatchewan. Does Saskatchewan have a comparative advantage?
In feedstocks, probably yes.”
Manitoba agriculture minister Rosann Wowchuk said her government will
study the report and decide whether to follow its recommendations.
“We want to ensure that we create activity and economic growth in the
province,” said Wowchuk.
She and Manitoba premier Gary Doer have promoted ethanol production as
an industry they want to encourage in rural Manitoba.
Progressive Conservative party agriculture critic Jack Penner said
fusarium-resistant wheat must be developed or ethanol plants in
Manitoba will benefit farmers outside of the province.
“I would suspect that this announcement would make Iowa corn farmers
very happy,” said Penner.
“It’ll provide another market for them, because our borders are open to
highly subsidized American corn.”
Keystone Agricultural Producers vice-president Chuck Fossay said if the
fusarium problem can be solved, the ethanol industry could help rural
Manitoba and prompt an increase in wheat sowings.
“Acreage would easily expand if we could come up with good resistance
to fusarium,” said Fossay.
