Fifteen years of lobbying and policy development came to fruition for the ethanol industry when federal regulations requiring five percent renewable content in gasoline came into effect on Dec. 15.
“It has been a great first step. We’re thrilled that the mandate has now finally come into force,” said Gordon Quaiattini, president of the Canadian Renewable Fuels Association.
One of the selling points with politicians was that the mandate would be a boon to corn growers in Eastern Canada and wheat growers in the West.
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They are the primary suppliers of the feedstock needed to produce the two billion litres of ethanol required to meet the first compliance period of the mandate, which ends on Dec. 31, 2012.
Quaiattini said the industry has delivered on that promise through higher grain prices, which are injecting more than $50 million of new revenue into the Canadian farm economy annually.
“Those farmers that are able to sell that feedstock within the catch basin of an ethanol plant do in fact get higher direct prices and it can be as much as 10 to 15 cents a bushel based on the research we’ve done,” he said.
But a cost-benefit analysis accompanying the recent release of the final regulation paints a different picture.
“Overall, the federal renewable fuel requirement is expected to have minimal impacts on the primary agriculture sector and no measurable downstream impacts,” said the analysis prepared by Environment Canada.
It said crop sector incomes are expected to rise by a modest 0.7 percent annually because any change in Canadian crop demand generated by ethanol plants would have no significant impact on world prices.
Western Canada’s seven ethanol plants consume an estimated 1.4 million tonnes of wheat annually at full capacity. That represents about eight percent of the spring and winter wheat produced in the region this year.
That pales in comparison to the U.S. ethanol industry, which is expected to consume 38 percent of that country’s 2010-11 corn crop.
But every little bit of extra demand helps, said Blair Rutter, executive director of the Western Canadian Wheat Growers Association.
“It’s not the saviour of the industry but it’s certainly an important outlet, especially since farmers are captive to the (Canadian) Wheat Board. So having this off-board alternative is certainly welcome,” he said.
The wheat ethanol plants built in the West have given farmers a different type of wheat to grow that fits in well with their rotations.
“Farmers are very pleased that these investments have been made,” said Rutter.
U.S. livestock producers have been outspoken in their opposition to ethanol subsidies in that country. The American Meat Institute is calling for an end to the ethanol production tax credit it claims has driven up feed costs by 50 percent.
The Canadian Meat Council has made submissions to the federal government expressing concern about the potential for escalating feed costs.
The group also has mounting worries about what impact the increased use of distillers grain in hog diets is having on the end product.
“It does have a negative effect on the meat quality,” said CMC executive director James Laws.
Another knock on the industry is that only 28 percent of Canada’s ethanol capacity is located in the West. Quaiattini believes that number will soon rise. He suspects some wheat ethanol projects received funding through the latest allocation of the ecoEnergy for Biofuels program, although the successful applicants have yet to be announced.
Quaiattini said the Canadian Renewable Fuels Association will start lobbying the federal government early in the new year to double the mandate to 10 percent.
