A Bio-economy Incentive Program
Expanding Bio-Economy Opportunities in Ontario
OCPA’s Market Development Strategy

For well over a decade in the late ‘80s and through the ‘90s, OCPA’s market development efforts were focussed almost exclusively on development of a fuel ethanol industry in Ontario. Much has been achieved, with the construction of the Commercial Alcohols Incorporated plant in Chatham, the anticipated construction of the Seaway Valley Farmers’ Energy Cooperative in Cornwall, and several other proposals for building or enlarging ethanol plants in Ontario or nearby in Quebec. Although several of these projects have yet to come to fruition, the outlook for expansion of ethanol manufacturing capacity in Ontario remains quite positive, particularly in light of recommendations from several recent government task force and Standing Committee reports. OCPA will continue to invest in building the ethanol industry, although other members of the Canadian Renewable Fuels Association will be taking the lead in the future.

Over the past 2-3 years, OCPA has focused our market development activities on assessing the potential to build additional commodity-based and new value-added markets for corn as a feedstock for biochemical manufacture in ‘bio-refineries’. In most cases, this suggests wet-milling corn processing plants that produce a multitude of corn-derived products that can be used directly or processed further for conversion to higher value industrial chemicals. However, the less complex (and cheaper to construct) dry-milling plants also have several opportunities to enter the biochemical marketplace with recently developed technological advances.

Many traditional petroleum-based industry giants (Dow, DuPont, Bayer, etc.) have established goals of developing significant portions of their sales on products manufactured from biological, renewable feedstocks over the coming decade and beyond. To this end, they are investing substantial amounts into R and D on proprietary products or processes.

While OCPA certainly views biochemicals as an important market sector to be developed for corn in Ontario, the benefit depends on these companies investing in processing/production plants in the province (preferable) or very nearby, so that Ontario corn can form a significant source of their feedstock. However, from the perspective of benefits to the producer, such bio-refineries present a mixed blessing. Additional demand for corn will certainly create upward movement in the local/regional basis for selling corn. For example, the current 15 million bushel annual demand for corn feedstock for the Chatham ethanol plant is estimated to have increased the basis for most of Ontario by about 10 cents/bushel, resulting in a net positive impact of about $20 million in additional income for Ontario corn growers, collectively. In the local vicinity of the ethanol plant, the basis increase may be as much as 20 to 25 cents/bu. However, such markets are still only bulk commodity markets, with buyers seeking to purchase corn at the lowest available price. With prices for Ontario corn being artificially depressed as a result of the U.S. government’s agricultural policy (through the substantially greater financial benefits available to U.S. farmers compared to those accessible to Canadian growers), having to accept commodity prices is insufficient for many Ontario farmers to remain economically viable.

Many farmers seek higher value opportunities for marketing their corn, markets which pay significant premiums, but generally also require higher levels of production management and/or end-product specifications suited to the particular market segment(s) being served. Unfortunately, many of these opportunities are only niche markets and are easily saturated by overproduction, resulting in lessening of the premiums. And unless the overall market size is such that a significant number of Ontario corn growers will benefit, OCPA as a provincial organization cannot justify expending significant resources to develop such opportunities since only a small portion of our members really benefit.

Focusing on market development objectives that will provide the greatest potential return for the largest portion of our collective membership is likely best accomplished through efforts aimed at achieving an attractive business investment climate in Ontario for renewable or bio-based industries. A positive business investment climate will encourage companies to locate their production and processing facilities in Ontario.

Such companies could cover the entire gamut – from commodity grain buyers (thus providing upward incentive for the local/regional/provincial price basis of corn) to ‘specification-based buyers’ (i.e., requiring corn which meets particular specifications, with a premium attached for the additional management required to deliver to that standard). In the latter case, the companies will bring with them the specific proprietary technologies and/or products that permit them to obtain more value out of the end markets. This means OCPA will not need to be concerned with spending our own resources to find the ‘needle in a haystack’ high value molecules on which many such specification-based markets are founded.

In addressing this agenda with government, primarily at the provincial level and to a lesser extent at the federal and municipal levels, OCPA will be focussing on several factors that merit consideration regarding how to make Ontario’s business environment more attractive to agri- and bio-based ventures.

These include:
• tax policy (investment tax credits, tax reductions/exemptions, etc.; Michigan’s‘Renaissance Zones’ program is an interesting example – see accompanying article)
• environmental policy (e.g., environmental compliance regulations or alternatively, incentives to achieve environmental goals, can affect a company’s or a grower’s competitiveness and/or the marketability of their products.)
• access to a reliable supply of competitively priced inputs
• adequate supply of investment capital
• R & D and/or business development and/or innovation incentives
• streamlined regulatory procedures harmonized with the U.S. and other OECD countries where possible
• government procurement policies and/or endorsement programs for bio-based (renewable) products
• public/consumer awareness assistance for Ontario-based bioeconomy products and technologies
• sound basic infrastructure, such as transportation and communication networks, etc.

Through this Bio-economy Incentive Program: Expanding Bio-economy Opportunities in Ontario, OCPA will continue to promote ethanol development, but will also broaden the scope of our efforts to include potential market opportunities in the fledgling bioeconomy, including biochemicals and bioproducts as well as biofuels. The focus on making the Ontario business environment more attractive will encourage investment ranging across the full market development spectrum – from expanded commodity markets to new niche markets and many in between. And this will allow many Ontario corn growers to accrue benefits from these markets.

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