Owen Roberts

Owen Roberts January 26th, 2009

Grain farmers have suffered from chronic low prices for decades. So they were understandably pleased when grain-based ethanol demand started pushing up grain prices.

Livestock producers, who buy the grain, weren't so happy. But a new report says that approach is short sighted, and urges grain growers and grain users to work together, so neither of them is stepping on the other.

And that, in turn, could help keep food prices at a steadier keel, instead of introducing panic over wild increases such as those the world feared last summer.

With this and more in mind, the George Morris Centre, the Guelph-based think-tank for agriculture, is calling for reconciliation between feed grain farmers and livestock farmers.

It says the two groups have to work together. If grain growers are lured to sell a disproportionate part of their harvests for ethanol production, the livestock sector will have to find feed grain somewhere else (likely the U.S., where the dollar alone drives up the price, not to mention transportation costs).

And if that happens, grain growers will have a problem if and when grains earmarked for ethanol production are replaced by much cheaper cellulosic sources — anything from switchgrass to waste wood.

Grain growers who go looking for their former customers — livestock producers –won't find any, because they'll either have committed to new suppliers or they'll be out of business. The high cost of feed will have driven them all away.

With them will go butcher shops, processing plants and consumers' local source of meat.

And we haven't talked yet about exports.

For an agricultural export-dependent nation such as ours, says the centre, losing a critical mass of livestock production can be devastating, especially to an already fractured economy.

So the centre wants government and industry policies developed that bring the two sectors together. This does not include incentives for ethanol production, or support to import feed grains from the U.S.

In fact, the centre warns grain growers to distance themselves from ethanol. With oil having dropped in price, the centre says ethanol is not as attractive as it once was for investment. It claims limited research is underway to support grain-based ethanol.

Instead, it says, attention has turned toward cellulosic ethanol production, for reasons stated earlier.

But some bridges need rebuilding before grain and livestock producers come together. Historically, they've often been at odds, with one (usually feed grain growers) convinced they weren't being paid fairly by livestock producers for their harvests.

Their point's well taken. When grain prices were in the basement, livestock prices were at least at the main-floor level, most of the time. There were certainly exceptions, particularly with pork, which is cyclical in nature from a pricing perspective, and with beef after the mad cow disease crisis.

But as grain farmers floundered year after year, needing billions of federal and provincial support dollars to keep them buoyant, they wondered why Canadian farmers wouldn't pay something akin to a Canadian price for feed grain, to help out, rather than the pathetic world price, which was creating all the problems.

Of course, this farming dilemma kept food prices down, and low prices became the norm. Grain was cheap, so meat from the animals that ate it was also fairly cheap, for consumers. That changed when ethanol increased the demand for feed grain.

But it's a new era, and the centre is calling on the livestock sector and meat processors to rally behind the feed grain segment as key partners.

Create a holistic and far-reaching strategy, it urges, and "restore harmony to a natural market dynamic that has been battered by unilateral and opportunistic manoeuvering."

And hope the oil companies don't turn on us again, before we figure out how to economically make cellulosic ethanol.

• Guelph Mercury
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