An Ontario agricultural policy think-tank says the potential demand of the biofuel economy is the answer to what ails Ontario’s grains and oilseeds sector.
Higher prices and farmers banding together to add more value to their products are the keys to a prosperous future, said an enthusiastic report last week from the Guelph, Ont.-based Institute of Agri-Food Policy Innovation, supported by federal and Ontario governments.
Authors David Sparling and Kristine Jack see nothing but good times ahead if farmers and governments play their cards right.
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“The industry has been rescued by uses for its crops, by being part of the solution to energy and the environment,” said the report. “The prospects are terrific.”
It should lead farmers to work together to get into the biofuel business.
But Ontario farm leaders are more cautious about the lasting effect of ethanol-driven demand for grain.
“There is a lot of hype about the whole ethanol industry,” Ontario Corn Producers’ Association president Doug Eadie said.
“All I know is that the selling price for corn at the end of March was less than we were getting in the 1970s and costs are much higher. We are making a living on yields now. I don’t see the boom.”
Geri Kamenz, president of the Ontario Federation of Agriculture, said the key is whether the biofuel price spike can be sustained.
“There is a lot of cautious optimism but we have seen high price spikes before and then they disappear,” he said.
A sustained period of high grain prices would allow livestock producers to adjust to high feed prices.
But Kamenz said history would suggest farm suppliers will increase their input prices to capture a share of higher grain prices, leaving farmers with less.
“Business is in the business of charging what the market can bear and higher prices mean the market can bear more,” he said. “But when commodity prices go down, input prices that have gone up rarely ever fall.”
The prospect of higher crop prices should lead governments to question whether they should be financially supporting small or very large farms, said the institute in its report.
The two-year-old institute is supported by the Ontario and federal agriculture departments as well as the Ontario Agriculture College and the University of Guelph.
It said the biofuel boom will end the sad-sack reality of low-income grains and oilseeds farmers looking for government help to survive. Crop prices will be higher and demands on government programs will be lower.
“This will mean a shift in focus and resources from surviving today to participating in a different future,” said the report titled Challenging Past –
Incredible Future.
“It will take significant investment but higher prices should reduce the demands on business risk management programs, allowing some of that money to be invested in the future.”
It said since 1997, close to 2,000 farmers, or 16 percent of Ontario’s grains and oilseeds producers, quit the business.
Meanwhile, larger farmers were making money. Producers who prospered most were those with revenues between $250,000 and $500,000.
The institute ended its report by asking some provocative questions about current farm policy assumptions.
“Should we be asking whether farms that sell less than $25,000 per year or even $50,000 can ever be viable? Do farm families on small farms with good incomes from off-farm jobs really need support? If some families on small farms are suffering from low incomes, aren’t there better ways to help through well-designed rural social policies?”
