Ethanol, Red Meat Trade, and Food Security

Transcription

1 Ethanol, Red Meat Trade, and Food Security Al Mussell, PhD Sr. Research Associate Canada s Independent Agri-Food Think Tank

2 Ethanol, Meats, and Feed Grains Canada is a top meat export supplier It is also implementing an ethanol mandate The extent to which these are in contradiction with one another not broadly understood As ethanol mandates are adopted, who will be the meat suppliers to new middle classes upgrading protein in diets? What are the implications?

3 Canada as Meat Exporter Abundant land suitable for growing grain crops Plentiful water resources Large land area Small consumer population Can produce far more feed grains than demanded domestically- export oriented Makes grains relatively inexpensive in-country Transportation of grains to market expensiveincentive for conversion to meat

4 Canadian Red Meat Exports, Thousand Pounds

5 Canada as Ethanol Producer Federal 5% ethanol blend mandate in gasoline; provincial mandates Operating assistance for ethanol plants Capital cost assistance In its infancy, but growing very rapidly Ontario as an illustration:

6 ON Ethanol Capacity End of 29 total industrial use of corn- 4,454,877 tonnes

7 What Effect on Canadian Red Meat? In Ontario ethanol made from corn (maize) Market allocates corn across industrial uses, feed for livestock under SM regulation, feed for red meat livestock SM marketing allows cost pass through; ethanol has subsidy Red meat residual user of corn, but only competitive at export price basis for corn; must adjust appropriately

8 What Effect Reallocation of Corn Due to Ethanol? Approach Ontario as illustration Estimate corn requirements in SM feed, industrial/ethanol, red meat livestock feed, and indigenous production Augment industrial use for planned ethanol expansion Estimate magnitude of adjustment Estimate value of adjustment

9 Feed Use of Corn

10 Corn Balance With Ethanol Development Corn Production Base (23-7) 6,9,221 Industrial Use (29) 4,454,877 Feed-SM Regulated (23-7) 1,188,657 Feed-Red Meat Livestock (23-7) 2,137,457 Apparent Corn Deficit (1,733,111)

11 Hogs and Cattle: Feasible Sets 1,, 9,, ) a d e (H g s o H r te g h u S la 8,, 7,, 6,, 5,, 4,, 3,, 2,, 1,, -, 2, 4, 6 Slaughter Cattle (Head) PPF With Corn at Steady State Industrial Use, No DDG Credit PPF With Corn at Steady State Industrial Use, with Full DDG credit PPF With Corn Industrial Use at 23-7 Average 27 Marketings 26 Marketings 25 Marketings 24 Marketings 23 Marketings, 8,, 1,,2 1

12 Lost Red Meat Value Added

13 Ethanol Returns, Ignoring Subsidies

14 Total Economic Effect, $/year

15 Implications for Canada Ethanol will be costly economic self-injury to Canadian economy Reallocation of corn to ethanol will make the import basis for corn virtually permanent, crippling export competitiveness in red meat Current course implies dramatic change; significantly weakens Canada as export supplier of meat protein

16 Implications More Broadly More generally, reallocation of feed grains into ethanol by a meat exporting country has two impacts: 1.Contributes to increases in the world price of feed grains 2.Increases the relative price of feed grains in-country Latter effect is broadly unrecognized; undercuts a country s strategic ability to export meats

17 Implications More Broadly Income growth in developing countries drives demand for upgrade in diets Domestic production of meat, but: Natural resources limiting in many developing countries Food safety levels and infrastructure for food safety limiting in many developing countries

18 Consumption Growth

19 Brazilian Meat Exports 25 s 2 n T o tric 15 e M d n 1 sa u T o Beef Pork

20 Implications More Broadly Forthcoming food security issue? What disruption occurs as meat export capacity moves away from countries with grain-based ethanol policies? Will the resource capacity exist in developing countries to produce their own meat protein? Will there be a gap? Will it come back around?

21 Working to develop a more competitive and prosperous Canadian agri-food sector.