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Ethanol, Red Meat Trade, and

Food Security
Al Mussell, PhD
Sr. Research Associate
Canada’s Independent Agri-Food Think Tank
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?
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 expensive-
incentive for conversion to meat
Canadian Red Meat
Exports, Thousand Pounds
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:
ON Ethanol Capacity

•End of 2009 total industrial use of corn- 4,454,877 tonnes


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
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
Feed Use of Corn
Corn Balance With
Ethanol Development
Corn Production Base (2003-07) 6,009,221
Industrial Use (2009) 4,454,877
Feed-SM Regulated (2003-07) 1,188,657
Feed-Red Meat Livestock (2003-07) 2,137,457

Apparent Corn Deficit (1,733,111)


Hogs and Cattle: Feasible Sets
10,000,000

9,000,000

8,000,000
) 7,000,000
d
a
e
H
( 6,000,000
sg
o 5,000,000
H
r
e
t
h 4,000,000
g
u
al
S 3,000,000

2,000,000

1,000,000

0
- 0 0 0 0 0 0
0 0 0 0 0 0
,0 ,0 ,0 ,0 0
, 0
,
0 0 0 0 0 0
0 0 0 0 0 0
2 4 6 8 0
, 2
,
1 1
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 2003-07 Average 2007 Marketings
2006 Marketings 2005 Marketings
2004 Marketings 2003 Marketings
Lost Red Meat Value
Added
Ethanol Returns,
Ignoring Subsidies
Total Economic Effect,
$/year
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
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
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
Consumption Growth
Brazilian Meat Exports
2500

s 2000
n
o
T
ci
rt 1500
e
M
d 1000
n
as
u
o
T 500

0
2004 2005 2006 2007

Beef Pork
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?
Working to develop a
more competitive and prosperous
Canadian agri-food sector.

www.georgemorris.org