February 3, 2012

Canadian meat industry affected by ethanol policy

Canada's meat industry has been affected by a domestic ethanol policy.

According to a study released by the George Morris Centre, while there are several factors which influence grain and livestock prices, Canadian ethanol policies also have a negative influence on the local livestock industry.

Canadian federal and provincial governments have developed policies for biofuels as part of a green fuels strategy to reduce petroleum fuel consumption and associated emissions. The Canadian ethanol industry has been created and supported by federal and provincial subsidies, grants and mandated usage of the product in gasoline. As a consequence, it creates a subsidised competitor for Canadian feed grains that form the basis of Canada's export-based livestock and meat industry.

The study found that Canadian ethanol production increases the price of feed grains in eastern and western Canada by about US$15-20/tonne and US$5-10/tonne respectively and that Canadian ethanol production resulted in reduction in livestock feeding margins and or increased losses for Canadian producers amounting to about US$130 million per year.

The bottom line is that federal and provincial ethanol policy has resulted in reduced incentives for livestock production in Canada. Expansion of the ethanol industry in Canada will amplify the negative consequences. As biofuel policy evolves, it is important that governments and industry understand these implications on livestock and meat development.