Good morning, Mr. Chairman and members of the committee.
As already mentioned, I am JoAnne Buth, and I'm president of the Canola Council of Canada. The Canola Council is the trade association of the canola value chain, including growers, seed developers, processors, and exporters. Our organization strongly supports a vibrant canola-based biodiesel industry that involves a made-in-Canada solution to benefit canola growers and all Canadians.
This legislation that will make provisions for the regulation of the renewable fuel content in diesel, coupled with the new $1.5 billion federal ecoEnergy for biofuels program, is key for the development of the biodiesel industry in Canada.
I know the time here is short, so I'd like to start with three conclusions: canola biodiesel is good for the environment, good for farmers, and good for the economy; canola is grown in abundance in a sustainable manner across the prairies, with additional acres in Ontario; and canola biodiesel has superior cold-weather properties that are clearly needed for the Canadian climate.
I'd like to spend a few minutes now expanding on some of those key points.
First of all, on the environment, there's a lot of talk about climate change and the impact that the use of fossil fuels has on the environment, but I have not heard of many practical solutions, especially for a country that relies so heavily on fossil fuels for both transportation and heating. offers a practical solution and a step in the right direction.
The use of biodiesel can reduce greenhouse gas emissions and alleviate health and pollution concerns, which have been raised because we're on this treadmill of ever-increasing production and use of non-renewable petroleum resources. According to a Canadian study done at the University of British Columbia, the reduction of greenhouse gas emissions from canola biodiesel is 85%, relative to fossil diesel. Reduced tillage practices that are commonly used in canola production also means less carbon released. In addition, using biodiesel can reduce carbon monoxide, unburned hydrocarbons, and smog-producing particulates.
I have a few comments on the impact to farmers and the economy. We currently export 75% of the canola produced in Canada. This renewable fuel standard will provide fundamental long-term support for the rural Canadian agricultural sectors by creating inelastic demand that's needed in our trade-dependent commodity. We are so very vulnerable to borders shutting because of tariffs and non-tariff trade barriers. Made-at-home canola biodiesel will stabilize demand and help increase the value-added industry that is already expanding in Canada in anticipation of increased use in North America.
The positive impact of a canola-based biodiesel industry will be seen quickly. Construction of biodiesel-producing plants can be completed in 18 to 24 months. Economic analysis shows that every dollar invested in biodiesel infrastructure returns two dollars of economic activity in construction and supporting industries. Predictable supplies of biodiesel production co-products will also provide additional economic activity. The meal from canola crushing is a high-protein livestock feed that can replace more expensive imported protein meal in dairy and hog rations. The bottom line is that every $100 million in additional demand for canola generates 730 jobs in value-added industries, $83 million in GDP, and $5.2 million in tax revenues.
Specifically on canola biodiesel supply and quality, we have no doubt that the Canadian canola growers can produce the seed needed for a 2% inclusion rate and for a 5% inclusion rate. The amount of canola needed for 2% would be 1.3 million tonnes if we took the entire biodiesel industry. In 2007 we produced just under nine million tonnes, meaning that biodiesel production would have used 14% of the crop.
The 2015 canola industry production target is 15 million tonnes, and that's for total production. We have already proven that we can grow more than enough canola to fill the mandate. The carry-over of canola seed was over 1.3 million tonnes for the last three years.
Canola biodiesel means quality. As you know, canola oil is the best heart-healthy oil for consumers because of its low saturated fat content. Low in saturated fat means clean arteries for people and clean fuel filters for diesel engines, resulting in superior cold weather performance.
Canola biodiesel is already proven and is used extensively in Europe. In Canada it's currently being demonstrated under cold weather conditions in Alberta, and at minus 51 degrees Celsius, trust me, it's a true test of Canadian cold weather. We are a clean way to power diesel automobiles, trucks, tractors, heavy equipment, and marine vessels. And diesel engines do not require any modification to use biodiesel.
To summarize, Bill is the first step towards creating a Canadian canola biodiesel industry. We urge you to act quickly to assure a long-term, viable Canadian renewable diesel industry. The time to move is now.
Canadian farmers stand ready to grow and deliver the high-quality, sustainable, and renewable feedstocks our industrial entrepreneurs will use to produce world-class renewable fuels here in Canada. We have a made-in-Canada crop that offers a made-in-Canada solution.
Thank you for creating the opportunity for Canadian farmers, processors, and the economy.
Thank you very much, Mr. Chairman.
I am pleased to be here, coming from stormy Alberta to snowy Ottawa.
It was just over 18 months ago that the Canadian government signalled its intention to have 5% of Canada's transport fuel come from renewable sources by 2010. At that time just over 200 million litres of ethanol was being produced in Canada. At the end of December last year, production capacity in Canada had risen to over 760 million litres per year from ten operating ethanol plants. Six additional plants are under construction, and when completed they would more than double the existing production to about 1.6 billion litres per year. This would represent about half the production needed to satisfy the proposed 5% target of the renewable fuel strategy.
The principal reasons for promoting a biofuels industry through government policies are, first, to enhance and stabilize farm incomes through introduction of new markets for farm commodities, second, to promote rural development and economic diversification, third, to lower greenhouse gases, and fourth, to assist with energy security.
In the short time I have, I want to discuss how well a biofuels industry achieves the first two of these objectives, promotion of rural development and improvement of farmer incomes.
First, what about rural development? Many have claimed that the new jobs biofuel plants bring to rural areas boost local employment and economic activity. This is true. However, there has been some tendency, I think, among proponents of the biofuel industry to overstate the economic activity linked to biofuels. Research shows that only a small number of permanent jobs are created in the biofuel industry. In Iowa, new 190-million-litre-per-year ethanol plants employ, at most, 35 permanent workers. Husky Energy's new ethanol plant at Lloydminster, Saskatchewan, will employ just 26 full-time workers. Even this modest outcome is somewhat tempered, since this is the gross gain in employment, not the net gain, and the difference is important.
A new ethanol plant increases the local wages of labour. This places pressure on other nearby businesses to raise the wages they offer. In response to higher wages, other businesses have an incentive to reduce the number of hours or people they employ.
In response to rising feed grain prices, the profitability and size of the livestock sector may be reduced, thus reducing the livestock transportation and processing sectors. The gross benefits, then, in rural development are reduced by the losses in employment and income in other sectors. For this reason, net gains in employment generally are much smaller than the gross gains, and in fact could very well be negative in the prairie provinces.
Another driving reason behind attempts to establish a successful biofuels industry in Canada is to improve farmer incomes. In response to the increased use of cereals and oilseeds for production of biofuels, agricultural commodity prices have increased dramatically over the last year and a half. Corn, soybean, and canola prices have about doubled, while barley and wheat prices have increased by nearly 80%. An inevitable and undesirable result of the biofuels frenzy is the higher feed costs for livestock producers. The prices of feed grains have risen dramatically in the last year and a half, and cattle farmers and pig farmers have suffered massive losses. These are exciting times for grain and oilseed producers, but they have dealt a financial blow to the beef and pork sectors, which rely heavily on the availability of feed grains.
Given the massive expansion that currently is under way in ethanol production in both the United States and Canada, it appears that feed grain prices could increase even more. Huge losses in the livestock industry have been experienced in recent months and may continue if ethanol production continues to expand or if low yields are experienced in any of the major crop producing areas in the world this year. This will be continued good news for crop farmers, but not for the livestock industry.
Will a successful biofuel industry fix the perpetually low farm income problem in Canada? Unfortunately, higher grain and oilseed prices do not necessarily lead to higher net farm incomes. What is important is net income, not gross income. Net income is the gross income minus the total costs of production. Because of increased prices of grains and oilseeds, prices are also rising for all the other inputs necessary for corn production, such as fertilizer, equipment, and storage.
In anticipation of higher returns from corn, land prices and rents are rising rapidly in the United States. Due to the competitive market structure of the grains and oilseeds sector, higher commodity prices always result in higher prices for land, with little or no improvement in the net returns to agricultural labour. This means the winners of the biofuel boom are likely to be the present owners of farmland. Farm tenants and workers will receive little benefit, and new farmers will be faced with higher costs of entry due to the higher costs of the land resource.
Although there will be more money coming into agriculture, not everyone will gain, and certainly the persistence of low net farm incomes in agriculture will not be relieved. We have a lot of evidence already about the land prices increasing. I'll skip that part.
It should be pointed out to members of this committee that many important economic issues relating to establishment of a biofuels industry in Canada have not been thoroughly researched. The costs and benefits to Canadian society of establishing a biofuels industry through government initiatives still are largely unknown. There are very few economic studies done.
It is clear there will be negative impacts on Canada's livestock industries, particularly beef and pork producers. I am becoming worried about possible changes in the pattern and locations of production due to the much higher feed costs. We have experienced major changes in the location of production in the past as a result of relatively small but permanent changes in grain-meat price ratios.
For example, when the transportation of western grains was heavily subsidized, much of the hog industry and some of the beef feedlot industry moved to eastern Canada. With the introduction of Crow offset policies in the late 1980s, and finally the end of the WGTA subsidies in 1995, much of the livestock industry moved back west.
There are already some major changes happening in the location of dairy production in the midwestern United States. Now, I ask myself, is our pig industry, particularly in Manitoba, vulnerable? And what about our large beef industry in Alberta? Could much of it move south of the border, or might some of Colorado's and Nebraska's beef industry move to Canada?
The truth is that we don't really have a clue what might happen with regard to changes in location of production of livestock. Furthermore, we do not have anyone in Canada conducting research on this issue. We've not even built the types of economic models that are required to analyze this issue. Contrast this with the situation in the United States, where about a dozen economists at one university alone, Iowa State University, have been modelling and studying this problem for more than two years already. I have attached my research to the Iowa State research to try to get some handle on what's going to happen in Canada.
In conclusion, it is clear that biofuels have become a growth industry with rapid expansion of ethanol in the United States, Brazil, Canada, and other countries, and a quickening pace of biodiesel production in western Europe. Government interventions in many forms, including subsidies for building and operating biofuel facilities, mandated proportions of biofuel contents in liquid fuels, and new regulations that change taxing regimes, have greatly stimulated the worldwide production of biofuels during the last several years. Many of the consequences of the biofuel frenzy will be undesirable for Canadian agriculture, though certainly farmland owners will gain.
Finally, it should be kept in mind that the markets for commodities like corn, wheat, gasoline, and ethanol are global. The exportable supply of grains in the United States has a large influence on world prices. The ethanol frenzy in the United States is having greater economic impacts on the Canadian agricultural industry than any biofuel policies implemented by Canadian governments. Most of the biofuel plants likely will stay in production even if they become unprofitable, if oil prices drop. Once the biofuel plants are built, they need to cover only their variable costs to stay in production. That means that all the consequences of the removal of such a large quantity of grains and oilseeds from being available for food and feed are likely to result, even if oil prices recede.
Thank you, Mr. Chairman, for holding this hearing on Bill and for inviting us to advise the committee on the policy views of the Canadian Cattlemen's Association, an organization that represents over 90,000 cattle producers.
I am an elected director of the Canadian Cattlemen's Association. I serve as vice-chair of the foreign trade committee and I also chair the CCA biofuels task force. My family and I ranch west of Grand Prairie, Alberta, and operate a cow-calf backgrounding and yearling operation.
The biofuels industry in North America has recently experienced significant growth. Proponents of a biofuels industry speak of the increased prices farmers are receiving for their grains, a cleaner environment, revitalized rural areas, and a reduced reliance on fossil fuels. Opponents generally talk about higher prices for food and the uncertainties around measuring the environmental footprint of biofuels relative to petroleum-based fuels.
Today I want to advise you on the potential effect on one of Canada's largest current customers for Canadian grain: the cattle feeding sector.
For every calf fed to finish, approximately 1.25 tonnes is required. As a result, profitability in the Canadian cattle industry is significantly affected by the availability and price of feed grains. The rapid growth in the biofuels industry in North America in the last few years has been encouraged by policies of production subsidization and mandated demand. This phenomenon, coupled with increased demand from developing countries, has left global grain inventories very low, and grain prices at record levels.
While we expect that both Canadian and global grain production will rise as a response to higher prices, we are concerned that the extremely robust growth and demand encouraged by North American biofuels policies may outstrip supply in the short and intermediate terms. In the event a crop shortage is experienced in any of the major growing areas of North America in the upcoming year or two, the cattle industry and its infrastructure could be devastated. During a year of shortage, the cattle industry would be hard-pressed to compete for feedstuffs with a competitor that has the advantage of a demand mandate.
I'm not here today on behalf of CCA to suggest that we're opposed to biofuels or profitable returns for Canada's grain producers. I'm here to be a voice of caution regarding the potential unintended consequences of this bill and to speak in favour of a transition to a market-based approach to the biofuels business in Canada.
Last year I chaired the CCA biofuels task force. This committee consisted of cattle producers from across Canada. We met with researchers, plant breeders, and ethanol producers. In the end, we came out with four recommendations, which the CCA board subsequently adopted as CCA policy. I will share these with you.
First is that the CCA endorse a clearly defined and expeditious transition to a market-based approach to the production of renewable energy that re-establishes a competitive balance between sectors.
Second is that the CCA support the elimination of tariffs on imported biofuels.
Third is that the CCA emphasize that any further encouragement of the biofuels sector should focus on the production of biofuels from sources that do not impact the availability of livestock feed.
Fourth is that the CCA formally request that the government incorporate safeguard measures in the event of crop shortages. These may include the elimination of any remaining tariffs, a reduction in mandates, and/or a reduction in incentives.
While we recognize the government's desire to help kick-start the biofuels industry in Canada, we suggest that ultimately, the marketplace, free of government-mandated demand, is the best method for determining the usage equilibrium for feed grains. A biofuels industry built on real market fundamentals will grow at a manageable pace and will be far more sustainable in the long run. The resulting growth will also be at a pace at which demand for feedstuffs is less likely to dangerously outstrip supply.
In closing, we would hope that the members of this committee would take steps to ensure that the biofuels and livestock industries can compete and coexist on a level playing field and thereby ensure that we will not simply replace one value-added industry with another.
Thank you for the opportunity to speak to this important issue.
Thank you very much for the question.
Certainly I mentioned it in my comments, and I've written it in several papers as well, that from consequences from the United States a huge expansion in ethanol is what's driving the grain prices around the world. The U.S. policies and actions are having far more influence than anything we're doing here in Canada. In Canada new ethanol plants create a few local effects, but in fact we would have pretty much the same grain prices whether we had ethanol plants or not.
The U.S. is spending an awful lot for this policy, and they're going to continue to spend a lot. They've made that clear. They're in quite a different situation from what we are. They're mired in Middle East conflicts, and this is a big attraction for them to reduce their dependence on oil. Of course they're not going to be able to reduce their dependence on import oil to any significant extent. About 3% of their gasoline consumption comes from renewable sources. President Bush has the 20-in-10 plan in the 2007 state of the union message, which would require almost five times the level of ethanol production as there is today, but I don't believe they can reach that level. Even if they do, they'll only get to 15% of their gasoline consumption. Agriculture will be completely changed if they ever get to that level.
As for your question about whether Canada should do this or not, just because the United States is doing it, I think we have to ask ourselves why we are doing that. We are not dependent on foreign energy supplies. In fact we're large net exporters of most forms of energy, including oil, gas, coal, hydro power, and many forms of energy. This is going to be costly for Canada to do this policy. I believe it will make the effects more difficult for some of the value-added processing industries in Canada.
I think it's something Canada should have looked at more carefully before it went down this path. I think we don't have the same urgencies as some of the other countries, and I'm not sure whether we want to continue to bankroll it. This industry is going to become very expensive; I have no doubt about that. Because of the high price of corn and feedstocks, even the ethanol industry in the United States is becoming close to unprofitable now. Our construction costs are significantly higher than they are in the United States. We tend to build smaller plants that don't have the economies of scale. In fact in several provinces there are numerous programs to try to help farmers invest in very small plants. These are going to become very high-cost plants that are going to have all kinds of financial fallout and require continued government support as we go forward.
It's an expensive policy. We can do it, but I think we should have taken a better look at it first.
I want to start off by saying that this committee and every member of this committee strongly wants to find the path forward for our cattle and our hog sectors, which are being devastated at this point in time. They're being devastated for several reasons. High feed prices are not the only reason, and I know you know that. You're not saying that they are.
When you talk about Iowa and you talk about politics and you talk about George Bush's foreign policy, the fact of the matter is the United States of America's largest net import of oil is from Canada. I tend to disagree with the Middle East thing a little bit.
Let's talk about Iowa, since you're talking about it right now. Talking politics, there isn't a politician—and you mentioned George Bush's plan to go forward in the state of the union message—who wants to win Iowa who would ever talk about taking away this industry from Iowa. It is something the people of Iowa and the people of the midwestern United States are very strongly protective of, because they see it as being hugely beneficial to their communities and to their economic benefit and their standard of living as a whole.
Obviously that's another side of this, and I think we should look into it a little bit more. But I think and I believe that if we act responsibly with this industry and we move forward with this, it could be a huge contributor to rural development in Canada, in places like Manitoba and Saskatchewan, where they haven't experienced the spinoffs and economic wealth that we have in Alberta.
I appreciate you coming out and having this conversation with us today.
When you're young, anything's possible.
I understand and I appreciate all of the discussion. I'm trying to grasp what's happening, and my understanding is that this industry has huge potential benefit for farmers. However, this is an environmental bill. We haven't talked a lot about the impact to the environment or actually to food of a potential acceleration of the biofuels industry in Canada, and I think we should.
We're here, we're the agriculture committee. We want to do the best for farmers, but at the same time we want to do what's right, not only for our country, but for the world. So I'd like to quote from a few articles and I'd just like your comments. Hopefully we'll have some time for that.
An article by H. Josef Hebert from the Associated Press in Washington states:
The widespread use of ethanol from corn could result in nearly twice the greenhouse gas emissions as the gasoline it would replace because of expected land-use changes, researchers concluded Thursday. The study challenges the rush to biofuels as a response to global warming.
So the question I think we have to ask ourselves is why are we doing this. If we're doing this to give farmers a better deal, then probably by and large and hopefully we can.... It's not that good for cattle and pork producers, but overall for the grain and oilseeds it's probably a good thing.
However, this study released Thursday by researchers affiliated with Princeton University and a number of institutions maintains that the previous analysis, which counted the carbon benefits for biofuels, did not count the whole land-use aspect. The study said that after taking into account expected worldwide land-use changes, corn-based ethanol, instead of reducing greenhouse gases by 20%, will increase it by 93% compared to using gasoline over a 30-year period. Biofuels from switchgrass, if they replace crop lands and other carbon-absorbing lands, would result in 50% more greenhouse emissions, the researchers concluded. That's one aspect studies are showing.
In the wake of new studies, a group of ten of the United States' most eminent ecologists and environmental biologists sent a letter to President Bush and the Speaker of the House, Nancy Pelosi, urging a reform of biofuel policies. And they said, I quote, “We write to call your attention to recent research indicating that many anticipated biofuels will actually exacerbate global warming”.
Just as an aside here, I'm from the teaching profession, and in teaching we had all these waves. There was some innovative scheme, and people would introduce it. By the time they found out it was no good, it would be happening—and I'm thinking of the open-school situation—and all of sudden we'd be re-inventing the wheel.
So if the Americans are seeing that perhaps this thrust they're pushing for is not the panacea they said, should we then not be studying this some more and maybe slowing down our introduction?
Dr. Klein, could I have your comments?
Yes, there certainly are a number of negative environmental consequences from crop-based biofuels. There's no question about that. The higher prices are stimulating more use of fertilizers and chemicals of various kinds, they're bringing in marginal pasturelands and so on for corn production, and they're stimulating monoculture. There are a number of unfortunate environmental consequences. There is the cutting down of trees in Indonesia and Malaysia to plant more palm trees to get palm oil for the biodiesel industry. There is a huge number of negative environmental consequences.
Certainly the greenhouse gas savings on corn-based ethanol and wheat-based ethanol are rather small. Even with biodiesel, where the savings are much greater, in fact studies show that if greenhouse gas reduction is your real goal, there are way cheaper ways of reducing greenhouse gas than using crops and oilseeds to produce fuel for our automobiles.
Studies show that it costs between $200 and $1,200 per tonne of greenhouse gas reduction. So if greenhouse gas reduction is your real primary reason for doing this, yes, you can get a little, but it's extremely expensive. As an economist, I can find all kinds of cheaper ways for $20 or $30 a tonne rather than $500 or $1,200 a tonne.
So I think greenhouse gas reduction is not a good reason for doing this. I think that energy security is not a good reason for doing this. And even in the U.S., where they are much more aware of this, they will not achieve anywhere near energy security by doing this. They sometimes say it's a piece of the puzzle, but it's a very, very insignificant piece of the puzzle.
So I think the arguments have to rest on it as being a farm program, and I think it's very effective as a farm program. Certainly the National Corn Growers Association in the United States, along with the American Farm Bureau, are very powerful and have been instrumental in pushing this forward. In Canada we have the grains and oilseeds groups, of course, also lobbying on this.
But I think it's a farm program that's going to be very expensive for Canadian society. We'll gain some benefits, but I think that for the same benefits we could do it a lot more cheaply.
Thanks, Mr. Chair, and thanks, folks, for coming.
Dr. Klein, you said in your remarks that whether it's the policy in the U.S. or the policy in Canada, a big blow has been dealt to beef and hogs. I might mention to you that we did have an emergency debate in the House of Commons last night. I guess the tragic and sad commentary on it is that the government had an opportunity to respond and act and has failed to do so, has absolutely failed to do so as of yet. Having reviewed some of the remarks made last night in the debate, I can only say that I see the government's action basically as cruel and unusual punishment on the beef and hog industry.
It really doesn't matter whether it's a U.S. subsidy or a Canadian subsidy; here we are talking about subsidies at the WTO, but for some reason I've been sitting here thinking that a subsidy to an auxiliary industry that is also having the impact of pushing costs up is also having consequences for the farming industry.
That's what we're seeing with ethanol and biodiesel. We support the ethanol and biodiesel policies; however, if governments, either foreign or domestic, are causing unusual circumstances and negative impacts on an industry, I do think the government has a responsibility to act. So perhaps I can get you to comment on that.
Second, at the political level, I think at the national level, we tend to combine the two, ethanol and biodiesel. There are pros and cons to both. I personally think our greatest opportunity is in biodiesel, but is it a problem? There's no question, if you look at Minnesota, that the ethanol industry has really positively impacted on rural development thus far.
What are your thoughts on this? Instead of combining the two, maybe we should be emphasizing one more than the other.
My view with regard to the canola industry--and I could be wrong on this--is that our going into biodiesel production with canola could in fact increase the source of feed supply for the livestock and hog industry because there will be more bio-product than would otherwise be the case. Now, I don't know if that's right or wrong, but I see Dr. Klein shaking his head.
Give me your thoughts on those comments.
There are a number of issues there, Mr. Easter. Thank you for the comment.
What we find in our studies is that the biodiesel industry, of course, is much more expensive to establish than the corn-based ethanol, and the cellulosic ethanol is even more expensive. In the economic models we've been working on, along with colleagues at other universities in the midwest United States, biodiesel and cellulosic-derived ethanol never come into the optimal solutions. You can make them come in, but by pouring in a lot more money. They just don't come in. Of course the reason is that soybean oil and canola oil just become very expensive. When you just take a little bit off the market, it becomes very expensive and becomes very expensive to run a plant on that basis.
As for the feeds, there is distiller's dried grain, which is a byproduct of the corn-based and wheat-based ethanol. The products that come from wheat and from corn are two different products. But there are a number of nutritional issues involved with that. I don't care to go through that here today, and certainly I'm not a nutritionist, but I've spoken with many, and the fact of the matter is that a lot of the DDGs, the distiller's dried grains, that are being produced in the United States today are being used for fuel to power the ethanol plants, because it's cheaper than natural gas, or simply dumped into landfills. It's not being used for feed because of a lot of the feeding problems that are associated with it.
They anticipate in the future that some of these problems will be worked out, but it's certainly not a panacea. It's a high-protein feed, but it's not the kind of feed that is really required for much of livestock. It's not used for monogastrics; and for beef, we need the energy, we don't need the protein, generally.
Well, I'm not advocating anything. I look at myself as doing what I can for the agriculture industry. I'm an agriculturalist. I'm a farmer. I still have my farm in Saskatchewan. I was a practising farmer before I went back to university. I look at myself as having no vested interest except to try to help position the Canadian agricultural industry to be as competitive as it can be.
Yes, as a citizen of the world, I am concerned about food costs. I see, now, rapidly escalating food prices in some areas of the world. I see the problem in Mexico, where they don't even produce any ethanol to speak of, and the price of tortillas has jumped four times within a month, and they've had to put caps on. I see the prices in China. I just got back from China last month, and there the price of pork has gone up by 55% and the price of cooking oil by 35%.
This is going to happen to all the people around the world, and it will affect mostly the people with the lowest incomes, including the people with the lowest incomes here in Canada. If anything interferes with that, I think there should be a good reason for it. I don't see a good reason here for this. I don't think it's going to help us.
It will help the owners of farmland. If you have a farm, like I have, yes, farmland is going to be worth a lot more, just like houses in Calgary and Saskatoon are. But it's not helping the industry, I don't believe.
Yes, I completely agree with that.
There are many opportunities for getting renewable fuels. I don't believe using food stocks that are for human and animal feed is the best way. Yes, we can get some fuel that way, but for the amount of corn that it takes to feed one person a 2,000-calorie-per-day diet for a whole year, you only get enough fuel from that to fill up your tank one time, and we burn it. That's food for people or for animals.
We can get a lot of renewable energy if we use forest stock, if we use grasses, if we use landfill waste. We don't have a big lobby group to generate interest and support for that policy. It will take a lot of money to that and we, as Canadian citizens, may well vote to do that—I would—and not touch our food and feed supply. We can use forest scraps, grasslands that are not being used for livestock feed, landfill, slaughterhouse remnants. All of those sorts of things--the food waste, the organic waste--generate biogas, which can be used for electricity. They're doing that all over Germany, Austria, and places in Europe.
I led a group of Canadians to look at many biogas plants in Bavaria and Austria two years ago. I think that's a good possibility, because it doesn't use food products, but it's expensive. And if we do that, it will cost.
Thank you, Mr. Chairman, and thanks to the witnesses for coming here today.
There have been a lot of good comments, some interesting. Mr. Klein, to say it straight up, a lot of your comments are pretty negative. It's a good thing that I'm an upbeat kind of guy, or I'd be pretty depressed by now.
Nothing is ever perfect. There's always a negative side. If you want to dwell on that, I guess you can choose to. But right now, with the environment, and what have you, there are societal pressures out there. This is something they want to see. Governments have a tendency to listen to the electorate.
What I'm saying is that it's here to stay. Grain prices go in cycles—they go through hills and valleys. I believe they were starting to rebound, but this has no doubt had an impact on the high grain prices.
It's good to see that they're profitable now after five or six years. This has had some effect on the other sectors, which we recognize. But no sector of agriculture out there—and I think this is an honest statement—wants to be profitable at another sector's expense.
I suggest that we look for ways to address the profitability in all the other sectors. What research have you done, Mr. Klein, to move toward that? You talk about poor use of canola—I'm going to use canola as an example—and claim that there are better uses. Could you suggest another use for canola that would get the same profit? I'm using canola because Ms. Buth is here representing them. What kind of research have you done? Do you have any suggestions?
Thanks for that question.
I'll maybe just put forward three quick suggestions.
One, of course, is that we like to operate on a level playing field, firstly. I think that's why I am here today.
Secondly, there is some opportunity, I think, in the longer term with SRM disposal and for some actual value creation. We are now faced with extra regulatory costs and burdens with the enhanced feed ban. We are bearing the burden of disposal costs, which we have asked for some assistance on for the industry in the short term to help offset those regulatory costs. So that is one action that would help us directly, if the Government of Canada acted on that recommendation, which we have put forward in the past and continue to put forward.
Thirdly, as feed grain users, we need our feed grains industry in Canada to be as competitive as possible. There are regulatory barriers to the new variety approval process that need to be addressed, particularly the issue of KVD—which I actually commend this government on for moving quickly—but also the plant novel trait issue. We need to ensure that the Canadian grains industry has access to the best and most expeditious technology and biotechnology that it can....
Thank you. Time has expired.
I want to jump in here briefly. I'm a Manitoba cattle producer, as Mr. Toews knows, and I know, Dr. Klein, that you're a good teacher. I have one of your students working for me, and she's fantastic; I can tell you that.
You talk about a level playing field. I lived through all the Alberta subsidies, buying up the packing industry and the cattle business, moving all the feedlots over into southern Saskatchewan—
A voice: That's socialism.
The Chair: It definitely wasn't a level playing field. I'm sure the Alberta government would say that sometimes you need those incentives to start off a business, and that's essentially what Bill is about. It's about providing short-term incentives to start off an industry.
Dr. Klein, you're right down on feedlot alley, and Travis and I benefit from those feedlot guys getting all those dollars to start off their businesses, the packing plants intended to start there. They buy our calves and put us in a better fiscal position, because they can be more aggressive in the marketplace than the poorer feedlot operators in other parts of the country.
Do you believe government incentives to start off those types of businesses that are so close to your area are wrong?
I just want to make a comment on food. I talked about the environment. There's an article called “The Looming Food Crisis”, by John Vidal, inThe Guardian, August 29, 2007. He starts off by saying:
Land that was once used to grow food is increasingly being turned over to biofuels. This may help us to fight global warming--but it is driving up food prices throughout the world and making life increasingly hard in developing countries. Add in water shortages, natural disasters and an ever-rising population, and what you have is a recipe for disaster.
Then he goes on to talk about the United States. He says that this is “bringing new money to rural America”, and we see that, but it's “also helping to push up the price of bread in Manchester, tortillas in Mexico City and beer in Madrid. As a direct result of what is happening in places like Nebraska, Kansas, Indiana and Oklahoma, food aid for the poorest people in southern Africa, pork in China and beef in Britain are all more expensive”.
He goes on to say that the Americans “are patriotically turning the corn belt of America from the bread basket of the world into an enormous fuel tank”. He goes on to talk about corn that used to go to cattle feed and food aid now going to ethanol, and the fact that this will have a devastating effect on developing countries.
We tend to be kind of insular. We look at what's happening here, and we look at the prices our farmers are getting, and we say that it's good and that we're much better off. But in a sense, is what we're doing, then, changing what's happening in the world?
Later on we see that the UN World Food Programme predicts that the demand for biofuels will grow by 170% in the next three years, so food prices are going to rise between 20% and 50%. For us, maybe we can handle that, but for a developing country and poor people, this is devastating, and we've seen that in Mexico.
I'm wondering whether we are going in the right direction with regard to what is happening in the world. That's the first question.
I have three specific questions, then I'll stop.
Mr. Toews, you mentioned biotech. Do you foresee that the accelerated push for biofuels will increase the pressure to get GM wheat? That's a question for you.
Ms. Buth, Manitoba, in its policy, has a 10% limit on crops that are going to be used for ethanol. That's the policy. They've decided to limit it. Should we be setting a limit for canola in Canada, or in other words, designating just 10% of our arable land for biofuels and the rest for food?
Dr. Klein, you said that fundamentally, this could change the face of agriculture. I'd like to know how. And if that's the case, should we be adopting this?
I'll start with Mr. Toews.
As to the remarks made earlier by Mr. Miller and Parliamentary Secretary Lauzon to you, Dr. Klein, I wouldn't feel bad about trying to show what the impacts are. This is a government that has always defined reality as pessimism, and that's how they attack you. It's your right to lay out the impacts, because in fact this government never wants to hear about the reality. We've seen that in the Canadian Wheat Board and in many other areas.
I'd say this to you: you're luckier working for a university, because if you were working for the government, when you stepped out that door you would have a gag order placed on you, because that's how far this government will go in terms of shutting you up from talking about reality. I'm hoping your remarks will maybe shock them into governing with some balance.
My question really relates to the energy sector, and I do recognize your concerns. As I said earlier, we do support ethanol and biodiesel, but I do think we have to look at it in a broader picture, and I'd like your comment on this. The energy security makes a whole lot of sense from the U.S. point of view, really from tri-national Mexico, U.S., and Canada. We tend to have a policy where we export our oil and natural gas to the United States in such a fashion that we give them cheap Canadian supply in real terms so that their industrial plant can compete against us using cheap Canadian energy.
Now, with the addition of biofuels, they are certainly looking at it from the standpoint that if they can be into biofuels and our fossil fuels, then it will give the Americans some energy security so they don't have to worry about the 80% of the world where they get energy supplies that are hostile to them or direct enemies. We don't seem to be looking at it with a broad-brush vision.
I'm wondering about the impact of this policy on hogs and beef. You've said that you've been to Germany, you've seen their biomass policies over there, and it's absolutely tremendous. Are there other ways we could be going in terms of supplemental policy on energy that would actually benefit the hog and beef sector?
We said earlier that there needs to be research and development into the byproducts of ethanol and biodiesel that would benefit the beef and hog sector, but are there other areas the government should be pursuing that it's not?
Talk reality. They may not want the facts, but we do.