1. Biofuels – Agricultural Issues and Outlook: Some Comments
Kurt Klein
University of Lethbridge
Lethbridge, Alberta
NAAMIC Workshop IV:
Contemporary Drivers of Integration
Cancun, Mexico
June, 2007

2. Recent Headlines in Canada
Fuel Ethanol and Food Supply
Join us for this unique networking symposium on one of today's hottest topics -- biofuels
Ottawa's 5% biofuel program backed
Biofuel credentials questioned as Canada hikes up ethanol targets
Canada Falling Behind U.S. Ethanol Industry
Alberta Boosts Homegrown Renewable Fuels

3. Objectives of Biofuel Policy
Reduce greenhouse gas emissions
Enhance and stabilize farm incomes
Rural development
Energy security

4. Reducing Greenhouse Gas Emissions
Modern agricultural practices use fossil fuels
Fuel also needed to process biofuels
Life cycle studies show:
20-40% ↓ from cereal-based ethanol
70-90% ↓ with cellulosic ethanol
40-60% ↓ with canola for biodiesel

5. Achieving GHG Reductions Through Biofuel Use is Expensive
EU studies:
Abatement costs via ethanol
$286 to $1429 per tonne of CO2 equivalent.
Abatement costs via most economic means
$30 per tonne of CO2 equivalent.

6. Negative Environmental Consequences
Shifting marginal land into crops
Increased fertilizer and chemical use
More nutrient leaching

7. Negative Environmental Consequences
More monoculture and soil erosion
Increased demand for water
1 litre of ethanol requires 4-8 litres of water
Deforestation
Habitat losses could endanger several animal species

8. Agriculture --Grain Prices Rising
Cereal Grains
and Oilseeds
May 2007
Price
May 2006
Corn, CBOT future, next-nearest month, in C$ per bushel
C$4.05
(↑ 54%)
C$2.63
Soybeans, CBOT future, next-nearest month, in C$ per bushel
C$8.27
(↑ 24%)
C$6.66
Oats, CBOT future, next-nearest month, in C$ per bushel
C$2.82
(↑ 35%)
C$2.08
Barley, WCE future, next-nearest month, C$ per tonne
C$181.00
(↑ 51%)
C$120.00
Feed Wheat, WCE future, next-nearest month, C$ per tonne
C$158.00
(↑ 36%)
C$116.00
Higher input costs for:
Beef
Dairy
Hogs
Poultry

9. Will Higher Grain Prices Lead to Improved Net Farm Incomes?
Gross income ≠ net income
Capitalization of higher grain prices into higher prices for inputs:
Fertilizer and machinery prices ↑
Farm land prices ↑
John Deere and Agrium share prices have almost doubled since last summer.
Winners are land owners
Not tenants or farm workers

10. Crop Land Prices Rising
Feb $6,010/Ac
Jan $5,250/Ac
Oct $3,800/Ac

11. Cellulose for Ethanol Much more energy efficient
1.3 from cereals
16 from cellulosic biomass
Iogen awarded US$80 million by US Dept. of Energy (Feb. 2007) to establish a cellulosic ethanol plant in Idaho
March 19 budget item

12. Logistical and Cost Problems
Harvest, collection, storage, distribution
100 million litre per year plant requires:
100 truckloads per day, each hauling 32 large round bales
Costs of harvesting, storing and transporting
$0.40/litre of ethanol.

13. Biodiesel – Opportunities and Obstacles
Environmental benefits:
Cuts exhaust emissions, particulates, odour
Reduces GHG emissions 40-60%.
A lot of interest:
Canola Council of Canada, farm groups, etc.

14. Cost, Technical Problems for Biodiesel
Higher cost of canola as feedstock
Price increased 49% since last year
Quality, cost and consumer issues
Animal fats, used cooking oils unlikely to be accepted by major fuel distributors
Flow problems in cold weather

15. Biofuels vs. Livestock Feed
Higher grain prices
Plants currently under construction in the US could more than double present capacity
Grain prices may rise further
Ethanol production likely ↑ even if oil prices ↓ and existing plants struggle financially
Need to cover only variable costs
Prospects good for grain farmers … but not for livestock production

17. Distiller’s Dried Grains for Livestock
100 kg of corn fermented in a dry-grind ethanol plant yields:
36 litres ethanol, 32 kg DDGs, 32 kg CO2
DDGs: high protein content but also problems
Flowability
Monogastrics
Lysine digestibility
Nutrient variability

18. What about Rural Development?
Local employment opportunities
Few permanent jobs created:
Iowa: 35 new jobs at 190 million litre plant
Lloydminster: 26 new jobs for 130 ml/year
New biofuel plants may reduce employment and economic activity elsewhere:
↑ local wage rates
↓ livestock production, processing, transport
Net gains in employment and economic activity usually less than gross gains

19. Conclusions Biofuel industry is expanding rapidly (with govt.)
Likely to severely hurt livestock sectors and raise prices for food
Many environmental negatives