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Canada: Is Your Car Eating Your Lunch? 30% of Ontario's Corn Crop Used for Ethanol, Driving Up the Price of Animal Feed
FEBRUARY 1, 2012
By: The Toronto Star
Canadian cars are stealing from the mouths of pigs and cattle, according to a new study on the impact of blending ethanol with gasoline.The competition between food and fuel is squeezing the size of the province's livestock sector, says the study - a squeeze that could get even worse if the amount of ethanol used in gasoline increases.
About 30 per cent of Ontario's corn crop is now used to make ethanol, a type of alcohol that also works as vehicle fuel. That's up from less than 10 per cent a decade ago, the study says.
The increase results from federal regulations requiring 5 per cent renewable fuel in Canadian gasoline. In the U.S., the requirement is 10 per cent.
In Ontario, ethanol is made from corn, which is also the main ingredient in most livestock feed.
Competition from the fuel industry is pushing up feed prices for pork and beef producers, says the study by the George Morris Centre, a Guelph-based agriculture and food research organization.
And the losers are beef and pork producers, who face higher costs as a result. "Ethanol is adding about $65 million in total costs to eastern Canadian hog marketers annually," the study says.
Put another way, the higher cost of grain is costing hog farmers about $5 an animal in profit. Since the farmer's profit per hog was about $10 last year and $5 in 2010, it's a significant hit. Losses to eastern cattle producers are estimated at $23 million.
A similar, though less pronounced, effect is occurring in western Canada, where about 4 per cent of the wheat crop is now used for ethanol, diverting grain that might otherwise have been used for animal feed - mostly cattle.
Kevin Grier, a co-author of the report, told the Star that U.S. grain prices and the Canada-U.S. exchange rate have a big impact on the setting of Canadian grain prices.
But the increasing amount of corn being used for ethanol in eastern Canada is pushing up the local price as well, Grier says.
"By our calculation, it impacts the Ontario price by $15 to $20 a tonne," he said. That's a significant effect, given a typical corn price of about $200 a tonne.
The study was funded by the Canadian Cattlemen's Association, the Canadian Pork Council and the Canadian Meat Council.
Grier said researchers at the George Morris Centre had already been doing research on the impact of ethanol production on the livestock sector prior to receiving the funding for the latest study.
"We're not talking about putting the genie back in the bottle. It's already out," Grier said.
But policy-makers must be aware that growing vehicle fuel instead of drilling for it has consequences to other sectors.
"They have to recognize what it has done, and what it will do," Grier said.
Boosting the amount of alcohol in Canadian gasoline to the U.S. level of 10 per cent would devour even more of the corn crop and result in about a 40 per cent contraction of hog and cattle production in eastern Canada, Grier said.
That would lead to job losses in the meat processing industry. The resulting higher corn prices would also push up the cost of dairy, poultry and eggs, as producers would be able to pass their higher feed costs on to consumers through a pricing formula, he said.
FEBRUARY 1, 2012
By: The Toronto Star
Canadian cars are stealing from the mouths of pigs and cattle, according to a new study on the impact of blending ethanol with gasoline.The competition between food and fuel is squeezing the size of the province's livestock sector, says the study - a squeeze that could get even worse if the amount of ethanol used in gasoline increases.
About 30 per cent of Ontario's corn crop is now used to make ethanol, a type of alcohol that also works as vehicle fuel. That's up from less than 10 per cent a decade ago, the study says.
The increase results from federal regulations requiring 5 per cent renewable fuel in Canadian gasoline. In the U.S., the requirement is 10 per cent.
In Ontario, ethanol is made from corn, which is also the main ingredient in most livestock feed.
Competition from the fuel industry is pushing up feed prices for pork and beef producers, says the study by the George Morris Centre, a Guelph-based agriculture and food research organization.
And the losers are beef and pork producers, who face higher costs as a result. "Ethanol is adding about $65 million in total costs to eastern Canadian hog marketers annually," the study says.
Put another way, the higher cost of grain is costing hog farmers about $5 an animal in profit. Since the farmer's profit per hog was about $10 last year and $5 in 2010, it's a significant hit. Losses to eastern cattle producers are estimated at $23 million.
A similar, though less pronounced, effect is occurring in western Canada, where about 4 per cent of the wheat crop is now used for ethanol, diverting grain that might otherwise have been used for animal feed - mostly cattle.
Kevin Grier, a co-author of the report, told the Star that U.S. grain prices and the Canada-U.S. exchange rate have a big impact on the setting of Canadian grain prices.
But the increasing amount of corn being used for ethanol in eastern Canada is pushing up the local price as well, Grier says.
"By our calculation, it impacts the Ontario price by $15 to $20 a tonne," he said. That's a significant effect, given a typical corn price of about $200 a tonne.
The study was funded by the Canadian Cattlemen's Association, the Canadian Pork Council and the Canadian Meat Council.
Grier said researchers at the George Morris Centre had already been doing research on the impact of ethanol production on the livestock sector prior to receiving the funding for the latest study.
"We're not talking about putting the genie back in the bottle. It's already out," Grier said.
But policy-makers must be aware that growing vehicle fuel instead of drilling for it has consequences to other sectors.
"They have to recognize what it has done, and what it will do," Grier said.
Boosting the amount of alcohol in Canadian gasoline to the U.S. level of 10 per cent would devour even more of the corn crop and result in about a 40 per cent contraction of hog and cattle production in eastern Canada, Grier said.
That would lead to job losses in the meat processing industry. The resulting higher corn prices would also push up the cost of dairy, poultry and eggs, as producers would be able to pass their higher feed costs on to consumers through a pricing formula, he said.
