Prairie farmers anxious to grow wheat for ethanol plants
WINNIPEG -- Husky Energy Inc. is just weeks away from opening its second ethanol production plant, a major step in the Calgary-based company's plan to become Western Canada's largest producer of the biofuel.
But Husky's determination to carve out a bigger piece of the ethanol market is also making it increasingly reliant on the region's grain farmers to grow the feed wheat needed for production.
Some farmers and agriculture groups say they're excited about the new business opportunity, but warn it will take time and government help to see real rewards.
Husky estimates it will need 700,000 tonnes of feed wheat a year by the time its new plant in Lloydminster, Sask., starts processing ethanol later this month or September and its expanded facility in Minnedosa, Man., is in production by mid-2007.
Together, the plants will produce about 260 million litres of ethanol a year.
For now, the wheat will come from farmers whose crops of spring or winter wheat fail to meet the higher standards for milling or export, which occurs if the growing season is too dry, too wet or infested by bugs.
But the Canadian Grain Commission is currently consulting with farmers about how to implement a new wheat class in August 2008 that could be grown specifically for the ethanol industry.
The Canadian Wheat Board supports the changes, saying they would give Western Canadian farmers more options and a lower-cost crop.
"The feed wheat now is basically milling wheat that doesn't meet very good grade," said spokeswoman Maureen Fitzhenry. "This way you'd start out with the intention of growing feed wheat for ethanol."
Last spring, Prime Minister Stephen Harper reiterated his election campaign promise to diversify farming by requiring five per cent renewable fuel content - such as ethanol or biodiesel - by 2010.
Manitoba has mandated the use of 10 per cent ethanol blend in 85 per cent of all gasoline sold in the province once Husky's Minnedosa plant is up and running. In Ontario, gasoline must contain five per cent ethanol by January 2007.
Ethanol is a high-octane alcohol normally made from wheat or corn. It can reduce emissions by up to 25 per cent, depending on the vehicle.
Owen McAuley, who farms 1,800 hectares of grain in McAuley, Man., has a keen interest in the ethanol industry.
In recent years, McAuley has often sold his feed wheat to Husky's Minnedosa plant, but only after a disappointing crop year has given him few other options.
He said that after years of struggling to grow high-quality wheat for export markets, he and other farmers would love the chance to move away from milling wheat and at the same time increase their yield.
But he said the federal government will need to step in soon and offer economic incentives to farmers, or Canadian farmers will lose out to their American counterparts who are receiving subsidies.
"If Canada can't compete, maybe we'll be importing all of our ethanol from the U.S.," said McAuley. "But that doesn't make any sense when we have the land base and we have the opportunity to create the jobs in our local communities."
He's anxious to learn more about a July announcement by federal Agriculture Minister Chuck Strahl that the government will spend $11 million to help farmers and rural communities benefit from the production of biofuels.
But Brian Hayward, the chief executive of Agricore United, said that while there is a place for Canada to participate in alternative energy, it's not in the country's best interest to pin all its future hopes on biofuel.
In a speech earlier this year to the Western Canadian Wheat Growers Association, Hayward said farmers might not be able to make ethanol as cheaply as other countries can from sugar or palm oil.
And he said the United States is growing so much more corn for ethanol at the expense of wheat that it may actually increase the demand for high-quality Canadian wheat.
Husky spokesman Dennis Floate said the company doesn't anticipate any difficulty getting a steady supply of feed wheat from area farmers, especially in Minnedosa, where the current, small plant has been in operation for about 20 years.
He said the company has contracts with some producers and has also been buying on the market.
"With Lloydminster that's a new thing for them (farmers) so we've been working with them," said Floate. "Some of them were holding back until they saw what we were building, but now we see a lot of people coming forward and anxious to sell product to us."
© Canadian Press 2006
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