GRAIN TRADE & MARKET DEVELOPMENT POLICY COMMITTEE
Notes for OCPA Annual Meeting
Ontario Corn Producers’ Association
March 5, 2008

Ethanol

OCPA began lobbying government for ethanol blended gasoline in August 1984. In October 1987, ethanol blended gasoline became available at UCO stations in Guelph and Listowel. The ethanol industry became established in Ontario in October 1996 when GreenField Ethanol (formerly Commercial Alcohols) opened its first fuel ethanol plant in Chatham, Ontario.

The ethanol industry in Ontario is becoming well established, as illustrated in the map below. As a result, OCPA is reviewing what its role is in the ethanol industry going forward and is considering becoming a member of the Canadian Renewable Fuels Association.

OCPA will continue to support the ethanol industry and the processing of ethanol from Ontario-grown corn. On February 27, 2008, OCPA issued a letter to the Ontario Energy Board in support of the Integrated Grain Processors Co-operative (IGPC). The IGPC issued a news release on February 11, 2008 appealing to the Ontario Energy Board to assist in getting natural gas to their plant to prevent delays in the start-up of the plant.

Bill C-33

Bill C-33 which is an act to amend the Canadian Environmental Protection Act, 1999 was introduced to the House of Commons in December 2007 and passed Second Reading, February 1, 2008.

This Bill seeks to amend the Canadian Environmental Protection Act, 1999 with respect to provisions for the regulations of fuels. It establishes minimum levels of biofuel content in gasoline, diesel fuel and heating oil to be implemented within three to five years; 5% average renewable content in gasoline by 2010 and 2% average renewable content in diesel and heating oil by 2012.

Several groups have made presentations to the Standing Committee on Agriculture and Agri-Food in support of Bill C-33 including the Canadian Petroleum Products Institute, Canadian Renewable Fuels Association, Canadian Federation of Agriculture, Grain Growers of Canada and Canadian Vehicle Manufacturers' Association.

Food versus Fuel Debate

Over the last several months, there has been a significant amount of media coverage on the food versus fuel debate.

Informa Economics, Inc. was commissioned by the Renewable Fuels Foundation to assess the extent the expanding ethanol industry has affected increased agricultural commodity prices and the impact on consumer food prices.

* The "farm value" of commodity raw materials used in foods accounts for 19 per cent of total US food costs, a proportion that xxhas declined significantly from 37 per cent in 1973. For food products where corn is only one of several farm-produced inputs, xxthe proportion to the total product cost attributable to the cost of corn is even less than 19 per cent.
* The remaining portion of total retail food costs is known as the marketing bill. It includes the costs of labour, packaging, xxtransportation, energy, profits, advertising, depreciation, rent interest, repairs, business taxes and other costs not attributable xxto basic agricultural commodities. The marketing bill has a higher correlation with the consumer price index (CPI) for food than xxdoes corn. Energy and transportation costs have increased considerably over the last several years with crude oil surging to xxnearly $100 per barrel in November during the same time period that price of corn has increased.
* The proportion of the average American's disposable income that is spent on food has declined steadily from 21 per cent of xxdisposable income in 1950 to below 10 per cent in 2006.

The report concluded that there is no single factor driving consumer food prices, or the moderately higher than average inflation during the first three quarters of 2007, but that there is a complex and interrelated set of factors that contribute to food prices.

The full report can be viewed on the website at www.informaecon.com.

WTO Update

It was over a year ago, January 8, 2007 when the Government of Canada initially requested consultations with the United States regarding their subsidies. Since then, Canada has participated in the consultations and requested the establishment of a dispute resolution panel. Brazil has also entertained consultations separately from Canada surrounding similar issues and also did not resolve anything.

On October 4, 2007, the United States submitted their 2002 - 2005 domestic support notifications. This data suggested the U.S. had not exceeded their WTO commitments which are contrary to the claims of both Canada and Brazil. Part of the issue is around some of the U.S.'s classifications of certain programs.

Back in the summer, after Brazil held its U.S. consultations, both Canada and Brazil started to work collaboratively together. As a result, on November 19, 2007, both countries made a request for a WTO panel on total level of U.S. trade-distorting support, an action that was blocked by the U.S. However, on December 17, 2007, a WTO dispute settlement panel on U.S. agricultural subsidies was established whereby all three parties agreed to a single panel and open hearings. The first hearing is expected to occur in March 2008.

ExcelGrains Canada

ExcelGrains Canada is part of the Canadian On-Farm Food Safety Program and is funded by Agriculture and Agri-Food Canada's Canadian Food Safety and Food Quality Program. It is currently managed by the Canada Grains Council with direction by a farmer Management Committee.

The On-Farm Food Safety Initiative outlines the safest possible production practices for farmers producing cereals, oilseeds, pulse and special crops. Producing safe food and feed and protecting it from hazards is the primary focus. The initiative is built on scientific data to give farmers and their customers' extra assurance that the grains were produced, handled and stored on the farm in the interest of food safety. It was designed to create a marketing advantage and enhance Canada's reputation as a leader in food safety. The initiative is based on the internationally accepted food safety control system called Hazard Analysis Critical Control Point (HACCP).

The Canadian On-Farm Food Safety Initiative for grains is voluntary and available to any interested Canadian farmer. The initiative for grains has been built by farmers from all parts of Canada in co-operation with scientists, agronomists, Agriculture and Agri-Food Canada, farmer and industry associations, Canadian Grain Commission, Canadian Food Inspection Agency and provincial and territorial governments.

A Producer Manual is available by contacting the Canada Grains Council, by telephone 204-925-2130 or by e-mail office@canadagrainscouncil.ca. The manual details and lists the safe production practices plus a process for record keeping that demonstrates appropriate steps at the right time were put in place by the farmer. Some farmers are using the manual for Identity Preserved (IP) contracts that satisfy specialty markets.

Direct Buy Programs

Casco and GreenField Ethanol offer on-line Direct Buy Programs for Ontario producers. Current bids are posted on their websites which provides producers with a marketing tool to monitor current price and basis offers and future pricing opportunities.

For more information, check the following websites.

Casco - Sell Your Corn - www.sellyourcorn.ca

GreenField Ethanol - Ontario Buy Direct Program - www.greenfieldethanol.com