Western Canada’s wheat ethanol industry doesn’t have the Canadian Wheat Board shaking in its boots.
“I don’t view it that they are going to be competition,” said Bruce Burnett, director of market analysis at the CWB.
While it is undeniable that producers are growing more winter wheat and soft white wheat at the expense of spring wheat, the impact on the board’s operations has been minimal.
“It’s still smaller than the domestic use of feed wheat,” said Burnett.
Unless there are policy changes, he believes the wheat ethanol industry has built as many plants as it can for now.
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If the board does have any concern, it has more to do with growers producing an overabundance of soft white wheat that is not suitable for export markets.
Local ethanol plants and overseas buyers are both looking for low protein soft white wheat, but those specifications may not always be achievable.
“That’s a concern of ours but it’s more of a technical nature than anything else,” said Burnett.
Growers need to know that if they want to market high protein soft white wheat through the board, the price will be lower than standard grades.
Other than that minor concern, he isn’t laying awake at night worrying about the one million tonnes of wheat ethanol plants will require annually that might eat into the board’s bread wheat business.
“In terms of acreage loss, that’s something that the international markets are going to work out.”
Burnett agreed with the analysis of Brenda Tjaden Lepp, of FarmLink Marketing Solutions, that hard red spring wheat doesn’t appear all that competitive right now compared to other crops.
He wouldn’t be surprised to see acreage of that class of wheat contract next spring, but that is true of corn and any other crop that relies heavily on fertilizer and other high-priced inputs. It is not due to competition from ethanol.
He disputed Tjaden Lepp’s assertion that in the long run farmers will be better off growing wheat for local ethanol plants rather than relying on the vagaries of international markets for high protein bread wheat.
Burnett said there are risks with either scenario. Growers have first-hand experience with what happens when wheat prices are significantly higher than imported corn prices. Ethanol plants turn to the cheaper ingredient in a heartbeat.
He wondered what will happen when growers produce a product ethanol plants don’t want, such as fusarium infected wheat.
“There is more uncertainty with the local contract than she is saying there,” he said.
In general, the CWB views the ethanol industry as a positive development for agriculture in Western Canada because it provides another outlet for grain. Burnett believes the two entities will co-exist nicely.
“Overall, this is good for farmers.”
