Canada Markets

USDA Studies the Canadian Biofuels Industry

By Cliff Jamieson , Canadian Grains Analyst
Data from the USDA's study of the Canadian ethanol industry shows Canadian fuel ethanol consumption (black line), fuel ethanol production (red line) and imports (green line) leveling after rapid growth since 2006, as measured in million litres on the primary vertical axis on the left. The blend-rate, as shown by the purple bars and measured against the percentage scale on the right, is estimated to peak at 6.1% in 2013 and 2014. (DTN graphic by Nick Scalise)

The USDA Foreign Agricultural Service released its Canada Biofuels Annual 2013 study June 28, focusing on both the ethanol and biodiesel industries in Canada. Despite positive trends within the industry as seen on the attached chart, the report highlights Canadian production continues to fall short of the mandated volumes, while U.S. imports are necessary to fill the void. The Executive Summary states "Canada's limited biofuels production, both in the short and medium term, suggests that Canada will not soon become a major player in the global ethanol market."

The federal government mandate of a 5% blend rate came into effect December 15, 2010. Two provinces chose to exceed the federal mandate with a provincial mandate of their own: Saskatchewan requires gasoline to contain 7.5% ethanol, while Manitoba requires a blend rate of 8.5%.

While Canadian production capacity is view as being at 1,802 million litres and is estimated to operate at 99% capacity in 2013, the Canadian federal mandate is estimated to be 2,269 million litres, thus making imports necessary to meet the mandate.

Forward projections for gasoline demand in Canada also do not create an environment for industry growth. While the estimated gasoline consumption for 2013 is 45,380 million litres, the forecast for the next 10 years, to 2023, is calling for an average annual consumption of less than 44,000 million litres.

Feedstock use in Canada is split between corn and wheat and has moved from a 2 to 1 ratio in favor of corn in 2009 to an estimated 3.5 to 1 ratio in favor of corn in 2013. Total feedstock volume has increased from 2.352 mmt in 2009 to 4.394 mmt in 2013.

Fifty-eight percent of current production is suggested to take place in Ontario, Saskatchewan produces 19%, Quebec is estimated at 10% and Alberta and Manitoba combined produce an additional 12.7%.

While this market has been a windfall for many producers in terms of providing a new and valuable outlet for grain which requires lower quality standards than many export markets, the rapid rise of the industry seems to have reached a plateau in a short time and may offer few prospects for growth.

The full report can be found at:

http://1.usa.gov/…

Cliff Jamieson can be reached at cliff.jamieson@telventdtn.com

(CZ)

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