A Note on the Profitability of Wheat‐ethanol‐feedlot Production in Alberta

Abstract

A risk analysis of the economics of alternative wheat supplies to a small ethanol-beef feedlot facility was conducted, based on historical data from an 18-year period (1978-96). Alternatives simulated were Black, Dark Brown and Brown soil zone locations in Alberta growing either Hard Red Spring (HRS) wheat, Canadian Prairie Spring (CPS) wheat or irrigated Soft White (SWW) wheat to supply a 10 ML per year ethanol plant. The plant would use the coproduct of wet distillers grains in the finishing of approximately 14,000 steer calves per year. Three valuation scenarios were considered: selling ethanol at its market price, inclusion of current Alberta tax incentive levels for ethanol sale, and sale of wheat to the Canadian Wheat Board as opposed to sale to an ethanol plant. Ethanol facility and total net revenues were highest for the CPS-Dark Brown soil scenario due to its relatively high ethanol yields per tonne of feedstock, and high grain yields per hectare. An integrated feedstock-ethanol-livestock operation selling ethanol at current subsidy (tax incentives) levels will lose money approximately half to two-thirds of the time over the long run. Without subsidies, an integrated facility would lose money two-thirds to three-quarters of the time.Nous avons réalisé, à partir de données recueillies durant une période de 18 ans (1978 à 1996), une analyse de risque des aspects économiques de diverses provenances de blé pour une petite exploitation éthanol-parc d'engraissement. Les options simulées consistaient en emplacements situés dans les zones de sols noirs, brun foncé et bruns de l'Alberta, produisant soit du blé roux vitreux de printemps (BRVP), du blé de printemps des Prairies canadiennes (BPPC) ou du blé blanc tendre (BBT) sous irrigation pour alimenter un atelier d'éthanol d'un volume de fabrication de 10 millions de litres par année. L'atelier hypothétique utiliserait le co-produit des drêches de distillerie humides pour engraisser quelque 14 000 jeunes bouvillons par année. Trois scénarios de valorisation étaient envisagés : vente de l'éthanol au prix de marché, inclusion des incitatifs fiscaux actuels de l'Alberta pour la vente de l'éthanol et vente du blé à la Commission canadienne du blé par opposition à la vente à un atelier de production d'éthanol. Les revenus nets tirés de l'atelier et les revenus nets totaux les plus élevés de l'exploitation étaient obtenus dans le scénario BPPC-sol brun foncé en raison des rendements d'éthanol relativement élevés par tonne de blé et des bons rendements grainiers par hectare obtenus dans cette combinaison. Selon les résultats obtenus, un atelier intégré blé-éthanol-parc d'engraissement écoulant son éthanol au niveau de subvention actuel (incitatifs fiscaux), perdrait de l'argen d'environ la moitié aux deux tiers du temps. Sans ces subventions, il ne rentrerait dans ses dépenses qu'une fois sur trois ou une fois sur quatre seulement.

A Canadian Ethanol Feedstock Study to Benchmark the Relative Performance of Triticale: II. Grain Quality and Ethanol Production

“…G lobally, fuel ethanol production has now reached 75 billion L yr –1 , and Canada’s contribution is approximately 2 billion L yr –1 (Canadian Renewable Fuels Association, 2010; Klein et al, 2004). Some economists have argued that ethanol fuel production from grain feedstocks relies too heavily on government programs to offset what is considered to be an inefficient system incapable of adequately reducing greenhouse gas emission targets (Freeze and Peters, 1999; Klein et al, 2004). Others have argued that ethanol should only be produced using crop biomass and residues (Canadian Renewable Fuels Association, 2010), considered by many as agricultural waste (Freeze and Peters, 1999).…”

“…Some economists have argued that ethanol fuel production from grain feedstocks relies too heavily on government programs to offset what is considered to be an inefficient system incapable of adequately reducing greenhouse gas emission targets (Freeze and Peters, 1999; Klein et al, 2004). Others have argued that ethanol should only be produced using crop biomass and residues (Canadian Renewable Fuels Association, 2010), considered by many as agricultural waste (Freeze and Peters, 1999). However, the dramatic rise in plant construction and output, including seven ethanol plants operating in western Canada with a collective annual output of 0.5 billion L (Canadian Renewable Fuels Association, 2010), suggests that the economics may not be as important as provincial and federal policies targeting energy diversity, agricultural benefits, and rural renewal (Coad and Bristow, 2011; Klein et al, 2004).…”

“…However, the dramatic rise in plant construction and output, including seven ethanol plants operating in western Canada with a collective annual output of 0.5 billion L (Canadian Renewable Fuels Association, 2010), suggests that the economics may not be as important as provincial and federal policies targeting energy diversity, agricultural benefits, and rural renewal (Coad and Bristow, 2011; Klein et al, 2004). Studies also report that >60% of crop residues must be retained to adequately maintain proper C cycling in the soil in wheat production systems (Freeze and Peters, 1999). Therefore, if crop residue exports are limited to 40% to maintain soil quality, ethanol production from grain is probably needed at some level to meet the increasing long‐term demand for ethanol.…”

Comparison of Waxy vs. Nonwaxy Wheats in Fuel Ethanol Fermentation

“…Wheat flour is used in composition of breads, noodles, cereals, and many other food products. In Canada and Europe, wheat has been used to produce potable and fuel ethanol Ingledew 1990, 1992;Sosulski and Sosulski 1994;Thomas et al 1996;Loyce and Meynard 1997;Wang et al 1997;Freeze and Peters 1999;Swanston et al 2005Swanston et al , 2007Agu et al 2006;Kindreda et al 2008). Because bioethanol is used world-wide as a renewable component of fuels, wheat is considered a main energy crop in Europe (Loyce et al 2002;Smith et al 2006;Rigler et al 2007).…”

Biofuel economics from a US perspective: past and future.

“…Experienced managers and technicians may be difficult to find, and risk-management strategies are critical in pricevolatile markets [43,48]. A Canadian case study indicates an integrated feedstock-wheat-ethanol-livestock operation with subsidies will lose money approximately half to two-thirds of the time and without subsidies would lose money two-thirds to three-quarters of the time [49]. Finally, producer electrical cooperatives' experience with biofuels indicates there are still some practical cost, availability, and performance constraints to their widespread use [42].…”