MOOSE JAW, Sask. – Kurt Klein isn’t jumping on the biofuel bandwagon.
The University of Lethbridge economist still farms, and has his entire acreage in canola this year. He has decided after extensive research that biofuel is not all it’s cracked up to be.
Lionel LaBelle’s advocacy of biofuel, on the other hand, is well known. The chief executive officer of Gardiner Dam Agri-Energy and former head of the Saskatchewan Ethanol Development Council is an enthusiastic promoter of the industry.
Not surprisingly, the two men agreed to disagree during a discussion at last month’s Farming For Profit? conference.
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Farmers may be looking at ethanol and biodiesel to boost incomes and add value to their grains and oilseeds, but Klein said some aspects of the biofuel frenzy need further scrutiny before the industry could be considered viable and worthy of investment.
For example, there is no doubt commodity prices have risen due to the increased use of grain.
“These are exciting times for grains and oilseeds producers,” Klein said. “But they have dealt financial hardships to the beef and pork sectors in particular.”
Feed costs for livestock producers are rising, which could lead to lower production and a corresponding drop in consumption, he said.
Farmers’ input costs are rising and that affects their net income.
“Higher commodity prices always result in higher prices for land with little or no improvement in the net returns to agricultural labour,” Klein said. “This means that the winners of the biofuel boom are likely to be the present owners of farmland.
“Not everyone will gain and the persistence of low net farm incomes is not likely to be relieved.”
LaBelle doesn’t buy those arguments.
He said livestock producers will simply have to pay the price of higher feed because that’s what the price is. He believes that, ultimately, food prices will have to go up.
As well, continuing research into the distillers grain byproduct from ethanol will make it a more attractive option to livestock feeders.
Klein then raised the question of whether growing crops for industrial uses will lead to hunger.
LaBelle said people have been growing cotton for clothing for 2,000 years.
“We grow crops in this part of the world called canaryseed, and we feed it to birds. Is that a moral issue? We grow flax that is used in some examples to make linoleum. Is that a moral issue?”
He also said higher grain prices could benefit third world countries that rely on low-priced grain imports from subsidized American and European suppliers because these countries might better develop their own agriculture.
While Klein agreed there are some rewards from developing biofuel, he said he’d invest in oil stocks first.
“I don’t feel comfortable … to encourage people to invest in this industry,” he said. “I’m worried. I think there’s going to be a fallout.”
The cost of investing in ethanol plants has doubled, he said, and feedstock prices continue to rise.
In the United States, plants under construction have a production capacity of at least 200 million litres, while in Canada, only three are reasonably sized.
Klein said studies show significantly lower investment and operating costs in large plants yet smaller plants are still being promoted in Canada.
