A recent flight over the southern Canadian Prairies brought home the very nature of agriculture. Though always alluring, being in food or feed production comes with an element of risk and uncertainty. This most certainly has played out in the recent months with excess moisture in many regions, and drought and cold in others. It brings to mind the many conversations over the past couple of years on the issue of agricultural land use and the shifts in thinking from food, to feed and now to fuel.
It would seem that food should take a priority around any agricultural table, and the conversation often drifts to the diminishing return in food crops. In my mind, if the return to the producer for growing food is the issue, then that is what should be addressed. Certainly, the lack of a free market and limited market access keeps the lid on feed and food grain prices, and takes the incentive out of adding value on domestic soil. By locking in food grain as a commodity, we effectively ask the entrepreneur to leave. Lack of creativity and burdensome regulation on domestic usage and exports have not fostered demand. Canadian food crops can be grown almost anywhere on the globe. As Canada is one of the top-10 food-importing and exporting nations, it could simply fill demand gaps with imported food and feed grain rather than change the system so that it works.
Defaulting to a focus on feed grain production did not perk up food demand. The languishing cry over using food acreage for feed acreage simply faded as there was no evidence to support a perceived shortage. For example, barley acreage on the Prairies has been declining since 2002, but that has not resulted in increased price. Not only do we grow more food and feed than we could ever consume but the animal industry must be in a constant state of health to pull the feed grain price along. Of course, stronger feed grain prices are antagonistic to profitability in the food animal industry. A vicious circle continues until they cycle breaks.
Limited co-product demand
Governments hoped that through the implementation of biofuel policy, using food or feed grain land for fuel would break the cycle of a diminishing margin in crop production and in some long-term way increase demand. It was argued that use of co-product such as distillers grain would offset the loss of feed production acreage. That has proven to be effective in some cases where there is easy and abundant access to co-product. But utilization never reached the targeted levels, as research showed adverse affects of heavy usage in feed rations. Again, there was an assumption, without proof, that land use could simply shift and that one industry would gobble up the spoils of the other and then there would be an increase in pricing in food, feed and fuel crop.
How will demand be fuelled? Demand for fuel product is being mandated but even ethanol can be shipped in from as far away as Brazil. It is fair to say that domestic biofuel production and co-product will be favoured as long as it is competitive. Aggressive North American energy policies, right through to the military that focus on high inclusion levels of biofuels, are engaging producers in the talk of land use solely for energy production. If this shift occurs then you have an impact on both feed and food crops. That pressure may ignite research into increased production capabilities within those crops.
It will not, I suspect, increase net revenue to farmers because we have yet to develop an effective vehicle to meet potential domestic and export demand and most certainly have stalled in our task of creating it. The lack of demand for feed and food crops will not be fuelled by alternate land use for energy. It is still what it is – a broken system that is lacking political and industry will to fix it by creating enabling legislation and regulation for the profitable production of feed and fuel in Canada.
Brenda Schoepp is a market analyst and the owner and author of Beeflink, a national beef-cattle market newsletter. A professional speaker and industry market and research consultant, she ranches near Rimbey, Alberta.[email protected]