An Ontario government proposal could dramatically increase the amount of Ontario corn going into ethanol production and help bring consistency to the basis price for corn in the province.
The government has posted its proposal to increase ethanol content in the province’s gasoline from five to 10 per cent to the Environmental Bill of Rights registry, which will result in public consultations on the proposal.
About 34 per cent of corn produced in the province is used for ethanol, says Mark Brock, chair of Grain Farmers of Ontario.
“I think for us any time you can create an opportunity to use more Ontario corn, no matter what the market opportunity, it is always a good thing for producers,” he says.
The government is motivated to increase the ethanol requirement for gasoline because gasoline burned in cars with ethanol results in lower greenhouse gas emissions, and press releases from Grain Farmers of Ontario and Renewable Industries Canada (RIC), which represents ethanol producers, reflected that reality. The policy would at the same time have significant effects on rural Ontario.
While the official level is set at five per cent, Jim Grey, president of RIC and CEO of IGPC Ethanol Inc., says that when all blending is taken into consideration there is more than five per cent ethanol used in gasoline. Therefore, the move to 10 per cent won’t be a doubling of demand, but it will be significant. Grey says about 500 million litres more ethanol will be required.
Six ethanol plants in Ontario operate at close to 100 per cent of capacity, and produce 1.046 billion litres of ethanol per year, according to a 2017 study of the sector by Doyletech, which also pegged use of ethanol at 7.7 per cent of gasoline, due to blending requirements. Net import of ethanol is at about 221 million litres.
Grey says the ethanol industry is healthy and doesn’t have any concerns that current and potential new players can fill the demand with expansion. The creation of the sector was helped by a provincial government Ethanol Growth Fund. Grey says there’s no need for government funding to accomplish the growth to 10 per cent. IGPC, based in Aylmer, Ont., is currently undergoing a significant expansion with no government help.
Creating 500 million litres more ethanol in the province will require a lot more corn. Brock and Grey expect most of the increased corn volume to come from yield growth, versus more corn acres.
“Corn yields not going anywhere but up,” says Grey. “I’ve been in this industry many years and if you look at total acres of corn over last long period of time, they have not changed dramatically, but yields and overall production continues to go up. There’s no reason why we can’t supply the increase with Ontario corn in short order.”
Ethanol companies may have to go further afield in the province to purchase supplies of ethanol, says Grey.
Farmers in areas of strong ethanol demand in the United States have evolved toward more corn on corn and corn-soybean rotations, which result in less healthy soils.
Brock says that technology and increases in yield, along with the growing use of cover crops, should help cover those concerns.
The increase in ethanol mandate will mean more local corn demand, says Bruce Burnett, Glacier FarmMedia’s director of markets and weather. Local demand will mean less Ontario corn will be on the move, whether exported or between provinces, he says.
An increase in demand should help solidify the basis in Ontario. The basis is the price that corn sellers are paid over or under the Chicago Board of Trade price once transportation, currency and other local market factors are taken into consideration. A stronger basis in Ontario compared to the American mid-west has cushioned farmers here from the recent stagnant, low corn prices in the U.S.
“We should see more consistency in price,” says Brock, as there will be more steady demand for corn. “It should help on the basis side of things.”
Both Brock and Grey are optimistic that the government proposal will become policy, despite what is likely to be some opposition. There are concerns about using land which could be used to grow food to grow crops for fuel, as well as debate over the lifecycle greenhouse gas emission levels of ethanol.
Grey says that the lifecycle modelling for ethanol climate impact used by the provincial and federal government is the accepted standard. According to RIC, that shows a reduction of 62 per cent in greenhouse gases when ethanol is used instead of gasoline.
Electric vehicles will have a place, says Grey, but the mass adoption of them will take a while. This is a policy the government sees will have an immediate and positive environmental effect, he says.