Last Friday, I wrote about the Canadian government finalizing regulations requiring an average renewable fuel content of five percent in gasoline and posed a question about what impact this will have on the market for ethanol as well as on U.S. ethanol producers.
The two billion liters (more than 500 million gallons) of renewable fuel needed to meet the five percent regulation would generate an annual demand for between Can$700-900 million worth of corn and wheat, reports Agriculture and Agri-Food Canada.
“The production of renewable fuels contributes to diversification of the agriculture and agri-food sector by creating a new market for agricultural commodities, and supports the movement of farmers into value-added production processes associated with ethanol production,” says Patrick Girard, a spokesperson with Agriculture and Agri-Food Canada. “At the same time, renewable fuel facilities built in rural locations will increase the number of jobs and economic activity in farming communities.”
Canada’s five percent regulation is expected to be met primarily through domestic production. Therefore, it will have little impact on U.S. ethanol producers.
The Renewable Fuels Association adds that idled capacity in Canada could very easily make up the demand pull created by the new regulations. “The Canadian fuel market is much smaller than the U.S. and thus, so is the renewable fuel requirement. That said, it could mean some additional export opportunities for ethanol producers,” said Matt Hartwig, communications director, RFA.