Straight talk, from real farmers, in their own words.
Today, consumers have many questions about agriculture and there seems to be no shortage of so-called experts willing to talk to them about the subject. Often, in our crowded world of traditional and social media, it is only the most outrageous headlines that are noticed, but not necessarily the most accurate. So, we asked a group of farmers if they would be willing to speak to you about agriculture. Several producers took us up on our offer. Each month we will feature one of their stories in an on-going series called?“Why We Care”. They will talk about everything from food safety to renewable energy. It’s straight talk, from real farmers and ranchers, in their own words. We encourage you to read and comment on these stories and to share them with others.
Biofuels have been good for our operation, our community, and the environment
Operating Canada’s first integrated feedlot/fuel ethanol facility has been quite an adventure. But when I look back I can say that the decision to pair an integrated 10 million-liter ethanol plant with a 10,000-head feedlot here at Pound-Maker Agventures (in Lanigan, Saskatchewan) in 1991 was a good one. It has generated benefits for our shareholders, our community, local farmers and the environment.
Our plant allows us to build some added value into the primary production in our area. It creates local jobs in a region where there are very few other employment opportunities. This creates all kinds of other spinoff?effects in the local economy.
Biofuel success story
Biofuel production has been an unqualified success story for the environment. The Canadian government recently released a report that reviewed all the investments that it poured into initiatives to try to reduce the country’s carbon emissions. The study found that funding the “ecoEnergy for Biofuels Initiative” was the most effective and most cost effective investment they had made.
Despite all of its benefits, ethanol production in North America has had its shares of ups and downs. Back in the early 1990s, when we first started production, grain was cheap. Corn was below the cost of production, and governments in both Canada and the U.S. were spending hundreds of millions of dollars supporting their farmers through various types of programs.
I think governments and others looked and said, ‘Man if we could create a market for all this excess grain, and start to create some value for it here at home, it will cost us less money than what we were going to have to pay out in ongoing stabilization and farm support programs.’
They generated a lot of hype and spurred support from the farm community to build ethanol plants. All levels of governments jumped on board and offered some pretty generous incentives to get them built.
Quite frankly the strategy worked. It created an internal market for grain and helped revitalize some rural communities, just like we did here in Lanigan. These were the main driving forces behind the push to stimulate ethanol production. Biofuels’ positive environmental benefits were just kind of a great extra thrown in.
A few years later, though, grain prices became a little stronger, and all of a sudden farmers didn’t think they needed them so badly. There was a lot of pushback that came from many?different areas. People said the ethanol industry was making lots of money and questioned why governments were continuing to support and subsidize the ethanol industry.
Support faded, and when there was a change in government in Canada, we went from having generous subsidies to none, practically overnight. Any plants that weren’t in the proper financial positions started to fail. Now the pendulum has swung back once again to the middle of the road. There are still a few incentives that give ethanol a bit of a break, but plants, pretty much have to run on their own merits.
Fortunately, we got a lot of good advice when we were in the early planning stages for our plant. We were told there was no way a plant our size would be profitable over the long term as a stand-alone project. It would only make economic sense if it was integrated directly into the feedlot.
We structured ourselves to buy grain from our shareholders, run it through the plant, and sell the ethanol. All of our by-products are used as a feed supplement in our rations and as a drinking source for our cattle. Our goal is to be as integrated as possible to keep our cost structure low to ride out the swings in both halves of our operation. Sometimes our profits come from the cattle and others from the ethanol. Overall, combining the two has worked well for us.
We marketed 33,100 head of cattle and produced about 14.38 million liters of ethanol in our 2013-2014 fiscal year. We bought just under 3.5 million bushels of grain from area farmers for feed grain consumption and ethanol production. Our combined payroll came to $2.8 million between both sides of the operation which provides all kinds of other spinoff economic activity in the local economy.
Ethanol coming back around
Ethanol has lost its gleam; its day in the sun is past, at least for a while, but it seems to be coming back around once again. The Paris climate change conference is underway at the time of writing. Some U.S. states and all the big Canadian provinces have either implemented or are looking at instituting some sort of carbon tax. They all are scrambling to figure out how they can meet their carbon intensity numbers.
Governments like big projects! We have to constantly keep reminding our local government not to forget the ethanol industry they already have up and operating in the province while they are pushing multi-billion dollar carbon capture technology to combat climate change. We provide a lot of value and we’re making a significant impact on carbon reduction today.
While I can only speak directly about our operation, I think renewable energy can continue to help the local rural economy and provide solid environmental benefits. Government programs do have a role to encourage the industry’s development. It’s a bit of a balancing act though.
If you throw in too many incentives, people build these things too quickly and they often don’t get a chance to build up enough financial stability to ride out the down currents. We saw this occur in the feedlot industry in the 1970s, the Canadian hog sector in the 1990s and early 2000s, and we saw it in the ethanol industry.
Creating a supportive environment
If our society wants to have a biofuel or renewable energy industry available to supply environmental benefits, a long-term regulatory system will have to be put in place to support it until it matures. This has to be done because it’s competing against a very mature, consolidated energy industry that really wishes we would go away.
We have to be recognized for the benefits that we do provide and institute a climate of profitability while the industry develops. But politicians tend to prefer short-term programs that support hot ticket items. They get a lot of good press out of them at the time, but it’s not what’s needed. Just helping an industry build plants cheaply without a strategy in place that will continue to make the viable for the long term is a recipe for failure.