Saskatchewan’s ethanol industry might have to take root and grow in a chilly climate, says a provincial agriculture think-tank.
“We find that some of the big grain companies are defensive about transformational change,” said Saskatchewan Agrivision Corp. executive director Al Scholz.
“They are heavily invested in the status quo. Change isn’t easy.”
And that status quo is the export of grain, not the fostering of domestic value-added businesses.
Ethanol plants pose a threat to the concrete inland grain terminals scattered across the province because they will suck up wheat that normally would have gone to established grain companies.
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Export terminals at port could suffer as well.
Scholz said ethanol plants could one day consume all the wheat now being exported out of the province and a potential disruption of that magnitude is shaking the big grain companies to the core.
“There is a resistance from them to be proactive in leading change.”
But he said it is imperative that companies like Saskatchewan Wheat Pool, which is more entrenched in that export mentality than rival firms like Agricore United, adapt to the new reality.
“When we make change all the players have to be onside, otherwise we’re going to have a half-changed system,” he said.
Fran Malecha, senior vice-president of Saskatchewan Wheat Pool’s grain group, said Scholz’s concerns are misplaced because the pool embraces the importance of developing a vibrant ethanol sector in the province.
The pool’s business philosophy is that it buys grain from farmers and leaves it up to the marketplace to determine whether the commodity goes for export or domestic consumption.
“I don’t see anywhere in that where we would be an impediment (to ethanol development),” said Malecha.
Currently 70-75 percent of the grain handled by Sask Pool is exported offshore or to the United States.
“But that’s just because that is where the markets are today and as the domestic demand increases I would expect those percentages to change,” he said.
As demand from the ethanol plants materializes, it will drive up wheat prices for farmers and will encourage business development in Western Canada and Sask Pool wants to be part of that economic boom.
“The pool will analyze and look at any opportunity that might be out there in those developing industries,” said Malecha.
Its potential involvement includes everything from being a contracted grain supplier to owning and operating its own plant.
“We have fixed our financial situation. We have a strong balance sheet and are going to be looking for investment opportunities to grow our business,” said Malecha.
But the grain handler missed out on its first big opportunity to participate in the province’s ethanol sector.
The contract to supply 350,000 tonnes of grain annually to Husky Energy’s 130-million-litre ethanol plant in Lloydminster, Sask., went to Agricore United.
Shortly after it was awarded the ethanol contract, AU bought the pool’s 50 percent interest in their jointly held 15,600 tonne grain terminal in Lloydminster for $2.4 million.
