The USDA's attache report titled Canada: Biofuels Annual, points to the country's consumption forecast to rise marginally in 2018 to 3.01 billion liters, up just .1% from the estimate for 2017. The blue bars on the attached chart note this. Over the past five years (2013-2017), annual consumption is estimated to rise by an average of 3.9% or 101.8 million liters/year. The USDA notes Statistics Canada data that points to the five-year average annual growth in gasoline consumption of 1.8%, while the blend rate for ethanol is expected to hold steady at 6.4%.
What is encouraging in this report is a forecast 5%, or 90-million liter, increase in estimated domestic production for 2018, which would be the largest year-over-year increase seen in seven years given data presented by the USDA. This is noted by the brown bars on the attached chart. While production was flat over the 2013-2016 period ranging from 1.725 to 1.740 billion liters, production is estimated to climb to 1.79 billion liters in 2017 and a jump to 1.88 billion in 2018.
This trend is due to continue into 2019, with an expected opening of a plant expansion by IGPC Ethanol Inc. at Aylmer in southern Ontario following a doubling of production from 178 to 378 million liters. The USDA also notes Greenfield Global that is studying an expansion from 175 million liters to 300 million liters in Quebec.
This growing domestic production comes at the expense of ethanol imports from the United States, with the 90 million-liter production increase in 2018 expected to lead to an 86 million-liter reduction in United States imports. This would be the first year-over-year drop in imports seen in three years and possibly the largest ever. Canadian production is expected to achieve 62.5% of Canadian demand in 2018, which would be the highest percentage achieved in six years.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT T
Wheat used as a feedstock is expected to increase for the second year to 925,000 metric tons in 2018, while remains below the estimated one million metric tons utilized in the grind in 2013, 2014 and 2015. Corn used in ethanol forecast for 2018 is pegged at 3.380 million metric tons, the highest ever, while demand for corn by the ethanol producers accounts for roughly 25% of the country's annual production and an even higher percentage if you look at the province of Ontario, estimated at 34%.
While this is a good news story for producers in the draw area for these plants and Canadian agriculture overall, what could go wrong? Ontario's current proposal to double the province's ethanol blend from 5% to 10% has yet to become law, while a provincial election set for June 7 in that province, as well as a federal election in 2019, could lead to uncertainty ahead.
DTN 360 Poll
This week's poll asks if you think a trade war between China and the United States would be good or bad for the Canadian farm economy. You can weigh in with your thoughts on this week's poll found at the lower-end of your Canadian DTN Home Page.
Cliff Jamieson can be reached at email@example.com
Follow Cliff Jamieson on Twitter @CliffJamieson
© Copyright 2018 DTN/The Progressive Farmer. All rights reserved.