Biofuel could solve the income problems of Canadian farmers.
An Agriculture Canada report says that if the world’s 30 major
economies replace just eight percent of the fossil fuel they consume
with fuel produced from grain and oilseeds, commodity prices would rise
high enough to solve the farm income crisis.
The report shows that if that eight percent use of biofuel was phased
in over eight years, in the final three years farmers would receive 22
percent more for wheat, 45 percent more for corn, 12 percent for
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soybeans and 66 percent for vegetable oils. Canola prices would be up
by 20 percent. Due to the higher use of ethanol over vegetable
oil-based diesel fuel, the increases would be higher for cereals than
oilseeds.
This prediction has a long way to go to reach reality, said University
of Saskatchewan economist Richard Gray.
“The problem is that it can’t just be a made-in-Canada approach. It
must be applied on a global scale if it is going to have an effect on
the world price for grain,” he said.
“At some point the western world is committed to reducing the use of
fossil fuels and that opens the door to greater use of grain for
non-food uses. When, is the question.”
Europe, North America and much of southeast Asia would all need to
start using biofuel for the prediction to work, said one of the
authors of the report, called An Economic Analysis of a Major Bio-fuel
Program Undertaken by OECD (Organization for Economic Co-operation and
Development) Countries.
“In the extreme situation of eight percent, there is a dramatic change
of fortune for Canadian grain farmers,” said Pierre Charlebois of
Agriculture Canada.
“We have a lot people in this department that are very interested in
this problem of low commodity prices. To raise prices we need to
increase demand or reduce supplies. This is one way of reducing
supplies.
“In Canada, a program like this would hit two ducks with the same
stone. Our officials are committed to Kyoto. They also have the crisis
facing the farming sector. But Canada on its own it would have a very
limited effect on farmers.”
The European Union is studying the same sort of program. Canada
presented the report to it and OECD representatives in Italy late last
year.
“The EU is looking at something more modest. They would like to set a
target of two percent of all transit systems fuel being provided by
biofuel by 2005. Six percent by 2010,” said Charlebois. “It shows how
far away we are from this (an eight percent replacement of fossil
fuels) becoming reality, but it shows the direction of things to come.”
Gray thinks Saskatchewan’s plan to expand ethanol production is on the
right track.
“We can make limited gains on transportation costs with a
made-in-Canada system, but we could affect rural jobs, communities and
stabilize some farm incomes.”
Gary said the Saskatchewan government’s plan to have communities and
livestock-feeding industries working together is a more likely outcome
for the near future.
Brian Paddock of Agriculture Canada, who oversaw the development of the
report, said any initiative that is going to increase commodity prices
substantially must be a joint activity of wealthy nations.
“Ethanol, bioplastics. These are big industries,” Paddock said. “Big
potentials and they have to be. We may be big exporters of grain, but
we are a drop in the international commodity market bucket.”
Gray agreed: “We produce two percent of the world’s grain. Anything
that comes along to stabilize and raise prices long term has to be big.”
Federal officials say there are no new plans to encourage the industry
beyond fuel tax exemptions and the program that protects against the
withdrawal of those exemptions.
“That could change if there was a sign that the rest of the world was
getting on board,” said Gray.
Federal agriculture minister Lyle Vanclief said in Saskatoon last week
that the government’s commitment of $140 million to study biomass
ethanol production in Canada is the limit of federal spending on that
issue.
The report is available on the internet at: www.agr.gc.ca/policy/epad/
english/pubs/adhoc/01133r/r01133_e.htm.
