by SUSAN MANN & BETTER FARMING STAFF
A George Morris Centre study, published on Tuesday, and blaming ethanol production for raising livestock production costs, has lit a fire under a simmering debate in rural Ontario.
In a news release on Wednesday Grain Farmers of Ontario chair Don Kenny states “there are so many examples of erroneous information” in the George Morris report “that I am disappointed Canadian livestock producers would choose to point a finger at the ethanol industry as the culprit for lost revenue.”
The George Morris Centre, a Guelph think tank on agriculture, blames the livestock losses on a reduction in livestock feeding margins. The Canadian Pork Council, the Canadian Cattlemen’s Association and the Canadian Meat Council funded the study. The authors are: Kevin Grier, senior market analyst, Al Mussell, senior research associate, and Irena Rajcan, senior research analyst.
The Canadian renewable fuels industry association describes the study as “outrageous.”
“Economics 101 would suggest that if you buy grain to do something clearly it’s going to have some effect,” says Tim Haig, interim president of the Canadian Renewable Fuels Association. “But to have this kind of effect, that’s crazy.”
Haig says the Canadian dollar moving from 80 cents to being at par with the United States dollar and oil prices increasing to US $100 a barrel has a bigger impact on grain prices than ethanol production. “Speculation in the commodities market has driven up all commodities.” And increased fuel costs have driven up feed costs more than anything, he says.
Haig says a Conference Board of Canada report released November 2011 notes the ethanol industry in Canada increased wealth by $2.3 billion.
Mussell says the George Morris authors acknowledge in their report there are a lot of factors that influence the basis levels for corn in Ontario and feed grains in Western Canada. “We’re trying to drill down on the ethanol influence.”
The study found that Canadian ethanol production increases the price of feed grains in Eastern Canada by about $15 to $20 a tonne and in Western Canada by about $5 to $10 a tonne.
Federal and provincial governments support the Canadian ethanol industry through subsidies, grants and a mandate that gasoline contain five per cent ethanol. The government support creates a “subsidized competitor for Canadian feed grains that form the basis of Canada’s export-based livestock and meat industry,” the George Morris report says. Expanding the mandated use of ethanol in gasoline to 10 per cent from five “will result in a serious reduction in feed availability in Eastern Canada. This will result in a dramatic reduction of cattle and hog feeding in Eastern Canada.”
The study says the bottom line is federal and provincial ethanol policy has resulted in reduced incentives for livestock production in Canada. Expansion of the ethanol industry will amplify the negative consequences.
“Governments must realize that the red meat industry developed over a long period of time and if it were to drastically decline it would take a very long time to return,” the study says.
Jean-Guy Vincent, Canadian Pork Council chair, says grain is the largest cost component of raising pigs and farmers can’t pass added costs on to customers. Producers have to absorb heavy losses or get out of business.
In a Jan. 31 press release, the Canadian Cattlemen’s Association says there should be a market-based biofuels industry. Government policy that helps biofuel producers buy feed grain “favours that industry at the expense of the livestock and meat sector.”
Ontario Ministry of Agriculture, Food and Rural Affairs spokesperson, Susan Murray, says by email the provincial government recognizes the ethanol industry provides a valuable source of renewable energy. “We are reviewing this report and will consider its findings as we move forward with green energy initiatives in Ontario.”
A study by Terry Daynard, former executive director of the Ontario Corn Producers Association and KD Communications for Grain Farmers of Ontario last year concluded grain based fuels have only a marginal impact on food prices. Mussell says Daynard, a former professor at the University of Guelph, didn’t ask them for input and “we didn’t offer any.” But Mussell says he doesn’t know how Daynard thinks “you can mandate a new use for corn and somehow it just doesn’t influence the corn basis whatsoever.”
The battle lines between grain and livestock farmers are not clearly drawn. Many farmers who have livestock also grow grain, Grain Farmers’ Kenny notes. Nor have the environmental benefits been taken into consideration. “Let’s not forget that the five per cent ethanol mandate is reducing greenhouse gas emissions by over two million tonnes each year,” the equivalent of taking off 440,000 cars from road, Kenny says. BF
Comments
Its easy to point fingers but I think its time the cattle and hog industry stops pointing toward the crop sector for its short falls. Pull up hog and cattle prices today and pull them up from 15-20 years ago, notice anything? They are the same everything else has gone up but cattle/hog prices have stayed the same. How can and industry survive if all other costs go up and the product never does? The packing plants are still making record profits the price of a steak in a restaurant is near $20 for 8oz,come on wake up. I know as a corn producer I'm not interested in producing corn at a loss so the beef and hog industry can give their product away to the packing and grocery industries. Maybe the beef/hog industry needs a "dramatic decline" it might create some supply and demand. I was once a beef farmer and left it to farm corn I'm finally enjoying making some money. YF
I agree the price of corn is good and the price you get for beef and pork not so good. Canda doesn,t stand up for its farmers like alot of other countries out there. There is going to be a loser somewhere in the food chain you just hope that your not in it. Like I always try to live by what I read way back by what seems as a really smart man,you look at your business and go over everything you do and whatever you are not making money at give it up and concertrate on the things you are.You have to be flexable and hope 9 out of 10 years you hit the profit margin,there is going to be someone making money off you doesn,t matter if you have a profit or not.
Please back up your statement by "pointing your finger" at even one packing plant which is making record profits.
In addition, your approach seems to be one of "blaming the victim" of your own good luck - all that does is make hog and livestock farmers bitter, and not the least bit remorseful about pointing their finger at you.
Stephen Thompson, Clinton ON
OK. How about I point at 2, Cargill and Tyson foods both saw profits go up in 2011. Cargill and Tyson account for over 60% of cattle killed in Canada. Also according to the OCA beef on rail is $2.05 lbs the first time since 2001, what was the excuse then for not making money on beef? Corn was cheap fuel was cheaper. I'm not blaming the victim the rise in crop prices probably hurt the bottom line but when your selling your product at prices that are 11 years old and that were not high enough for that time either, they have no one to be bitter with but them selves. By reading your comments I gather whats best for Agriculture is to kill a new market for one commodity so it can supply another that's not getting its fair share? I wish the beef/hog guys would get what they deserve for their product then I could grow more corn thats whats good for business having markets compete not killing them. YF
Firstly, the only issue is that Ontario-based ethanol production has artificaily raised the price of corn in Ontario by 50 cents per bushel - both the Grain Farmers of Ontario, and the George Morris Centre, point that out, and nobody is denying it.
Secondly, the George Morris Centre has simply quantified the obvious, which is the extent to which this artifically-created 50 cent extra cost for feed, has adversely affected Canadian livestock and hog producers.
Thirdly, Canadian corn farmers need to stop denying the fact that the increased profitability they enjoy because of Canadian ethanol mandates and subsidies, is equally offset by the increased costs faced by their neighbours who feed corn.
Stephen Thompson, Clinton ON
I did read the article. All I'm saying is, if the beef/hog industry had any control over the product they produce they could raise the price to cover the 50cent extra cost of feed, but they don't. I don't see in the report how its affecting the other guys who feed live stock ( dairy/poultry) the cost has gone up for them as well but they have control. Its easy to blame the other kids on the play ground for not helping you out when the bully is beating on you but someday you have to stand up and say I'm not taking anymore! If they don't this same broken record will be play 10 years from now how ethanol has put the price of feed up.
I've, albeit only quickly (so far), read the George Morris Centre report, and the outrage coming from the ethanol people would appear to be because they've simply, and completely, been left "without a leg to stand on".
It would appear to me that, at every turn, the report stripped away every other factor to get to the nub of the issue which is the dollar value of the extent to which Canadian ethanol mandates, and/or subsidies, have adversely affected our livestock and hog industries.
Stephen Thompson, Clinton ON
So before ethanol, corn was cheap, and you could mark your calendar with the dates that grain farmers would be protesting on the 401. Now with a taxpayer funded purchaser of corn competing with livestock producers everything's alright. It would be interesting to see where the grain industry would be without government involvement in ethanol.
While critics of ethanol are quick to point out that the sector receives government support they neglect the fact that it also has enormous taxes applied to its production.
A bushel of corn yields about 10 litres of ethanol that is taxed at a rate of $0.10/litre in federal and $0.147 provincial road and excise taxes. Then the whole works gets hit with 13% hst. All told that adds up to almost $0.40 a litre or $4.00 for every bushel processed.
A plant like Chatham or Aylmer will process more than 16 million bushels of corn a year generating north of $60 million in taxes. The incentives paid to those plants are less than half that amount.
No other ag product save perhaps tobacco faces anywhere near that tax burden, so perhaps we need to be looking at the whole picture before cherry picking parts to make an argument.
Energy in almost all forms, traditional or renewable, receives favourable government treatment.
Livestock producers who receive considerable support themselves through CAIS, Agri Invest and more recently RMP, amongst many other programs should also be careful about waving the market driven flag too broadly at other sectors lest someone sugest they practice what they preach.
As the article points out by and large this is a squabble between producer groups and not farmers themselves.
Your example about the taxes generated by ethanol, is off the mark - this isn't new tax revenue, but rather tax revenue "stolen" from oil.
Furthermore, this report notes, on page 30, that their estimate of a $15- 20 per tomme increase in the price of corn because of Canadian ethanol legislation, is entirely consistent with 2011 research conducted for the Grain Farmers of Ontario (GFO) which stated that:
"110 million bushels of corn are used to make ethanol in Ontario; without this, Ontario corn prices might have been as much as $.50/bushel less in recent years."
The George Morris Centre (GMC) report goes on to note that the 50 cent per bushel figure used by the GFO report, is approximately $20/tonne.
Therefore, people who criticize the conclusions of the GMC report would appear to be trying to have it both ways.
Stephen Thompson, Clinton ON
This etahanol, like solar or windmills has nothing to do with anything other than Gov't policy and mandates that make 0 financial sense.
follow the money $12000 per acre farm land sales
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