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Canadian livestock industry hit by ethanol, finds study

By Carina Perkins , 01-Feb-2012

A new report has revealed that Canadian ethanol production is costing the country’s livestock industry millions of dollars.

The study, carried out by the George Morris Center on behalf of the Canadian Pork Council (CPC), the Canadian Cattlemen’s Association (CCA) and the Canadian Meat Council (CMC), revealed that Canadian ethanol production has increased the price of feed grains in eastern and western Canada by around CAD$15-CAD$20/tonne and CAD$5-CAD$10/tonne respectively.

This is putting pressure on livestock feeding margins and causing Canadian livestock producers to lose around CAD$130m a year, resulting in lower livestock feeding prices, increased exports of feeder animals and reduced incentives for livestock production in Canada.

The report points out that ethanol production is heavily supported by the government, with the industry receiving around CAD$250m of financial support annually in the form of capital and subsidies. The industry is also supported by mandates that dictate ethanol usage in gasoline, which is currently set at 5%, and through tariffs to protect it from foreign competition.

Dismissing the theory that the ethanol polices of the US and global grain prices are the main cause of high grain prices in Canada, the report stated: “It is important to once again emphasise that the strengthening in the grain basis due to Canadian ethanol policy, rather than the world price of grain, is the driver of these developments.

“Ethanol policy in Canada, not the US policy, is having and will have far-reaching effects in terms of adjustments in the location of livestock feeding and meat production, and the associated economic developments associated with them.”

It warns that any further expansion of the ethanol industry – including proposals to allow the ethanol industry to move to a 10% blended mandate – would lead to a dramatic reduction in beef and pork production in Canada.

“Looking to the future, it is crucial for the livestock and meat industry that the policies and programmes sustaining the ethanol industry be curtailed or eliminated,” it says.

Industry impact

The research has been welcomed by the Canadian meat industry, which has long argued that the growth of ethanol production in Canada is having a negative impact on the livestock industry.

CPC chair Jean-Guy Vincent said: “This careful assessment of the evidence confirms for pork producers what we have felt all along – the rapid growth of ethanol production in recent years has affected the livestock industry by increasing grain prices. We strongly urge governments – federal and provincial – to take the results of this study into account in considering any further stimulation of ethanol production in this country.”

CMC president Scott Entz added: “Using precious agricultural land and input resources. such as fertiliser, pest controls and water, to grow an input to fuel our vehicles rather than feed livestock and people is not a good strategy for the future, especially now that the world’s population has surpassed 7 billion people.”

The Canadian Cattlemen’s Association (CCA) said that Canada should move towards a market-based biofuels industry. “Government policy that favours biofuels production as a purchaser of feed grain favours that industry at the expense of the livestock and meat sector,” said CCA president Travis Toews. “We aren’t against high grain prices, but we want to compete on a level playing field.”

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