Top Crop Manager

Can biofuel and potato production co-exist?

The biofuel industry may offer some interesting challenges for potato growers.

March 11, 2008  By Top Crop Manager

As biodiesel and ethanol plants spring up across the US like dandelions on lawns, the opportunities for field crop producers have increased. Stories of wheat production declining because corn for the biofuel industry pays a better return followed by concern of food shortages if not enough wheat is grown fill the air waves and newspapers. In some instances, there may be reason for concern, but how does all this hype affect potato growers?

The impact on potato growers in the US appears to be greater than it is in Canada. In fact, there has been little impact in the Canadian potato growing regions, but that could change. While some of the concern is the reduction of acres planted to potatoes, the reality is that all growers need viable rotation crops and the biofuel industry may give them some.

“Another high value crop that could be rotated with potatoes would be good for growers,” says Gary Sloik, manager of the Keystone Potato Producers in Portage La Prairie, Manitoba. “Traditionally, our rotation crops have not been giving good returns, so the ethanol and biodiesel industry may give growers a good alternative.” He says areas that can successfully produce corn in Manitoba would now have an alternative high value crop that could replace potatoes, which would reduce any issues surrounding over production.

Photo Courtesy Of Patates Dolbec, Saint-Ubalde, Quebec.

For an example of how potato production is being affected, growers can look south of the border to Washington State’s Columbia Basin, famous for its crop diversity and the acres of potatoes that are grown for processing. “So far, we are not seeing an impact in the Columbia Basin, but we expect to,” says Dale Lathim, the executive director of the Potato Growers of Washington. “We are starting to see competition for land to supply fuel production and that will affect potato growers.” He says rental rates for land have increased by 50 percent in recent months and they may continue to increase. Traditionally, the potato was the king of crops and land used for potato production commanded the highest rent. But, Lathim says rent being paid now for land that will be used to grow fuel crops equals the rent being paid for potato production, so there is no premium to be achieved by a landowner renting to a potato grower, and the potato industry has to compete for land.

Lathim uses sweet corn as an example of what has happened as a result of the biofuel furor. In 2007, sweet corn processors offered to pay US$68 per ton, but they got few contracts and the price was raised to US$80 per ton. When they did not get the acres needed, they had to buy sweet corn from other areas of the US. Contract prices for 2008 increased to $US100 per ton and the processors supplied the seed. All the increases in land rent and higher costs will get passed on to consumers.

“If we want ethanol plants, we are going to have to pay more for food,” is Lathim’s assessment, which could be positive for potato growers. However, he sees a reduction in potato acres coming, which is a concern for processors. “Potatoes were the number one crop in the Columbia Basin for two decades,” he says. “There are now eight other crops that will return as high or better profit margins than potatoes.” This is partly helped by the desire for biofuels.

But, will Canadian producers feel the same squeeze? It is possible, however, they may also find new market opportunities south of the border because Canada is slower to get on the biofuel bandwagon. Several biofuel plants were scheduled for Ontario, but a government directive to put them near municipal water supplies and not in agricultural areas sparked a public outcry and the plants were never built.

According to David McKenzie, chairman of the Ontario Potato Board, the impact of biofuel on the potato industry in that province has been minimal so far. He says that corn acreage in Ontario increased in anticipation of the biofuel plants opening and now jaded corn growers have switched to wheat because the price is the best it has been in years. Again, as a result of biofuel.

“High value potato crops are not a viable fuel source,” explains McKenzie. “Potatoes would make an excellent source for ethanol but it would be too expensive to produce them for this use. However, we did see an opportunity to remove our culled potatoes to the ethanol plants.” He points out that Ontario potato production costs the most in North America and biofuel plants will not be able to cover that cost, whereas it can afford to pay a premium for corn. He also does not see potato acres being reduced in the near future because Ontario growers have contract commitments to processors and customers, which means only discretionary acres would be removed from production.

If McKenzie sees any negative impact on potato production in Ontario as a result of biofuel, production it will be the increase in fuel costs to growers. The province has legislated that by 2010, all fuel sold in the province must have 10 percent ethanol content. If enough ethanol plants do not materialize in the province, the supply will have to be purchased from elsewhere, leading to an increase in fuel costs. Those fuel costs will have to be paid by growers if they wish to continue production. “If biofuels were manufactured here, we could reap the benefits,” he says. “Instead, because we have too few plants, we will pay the price.”

Back in Washington, Lathim says growers are not yet using biodiesel in their equipment, but it will eventually happen. “There is a growing demand for these fuels and no doubt every
gallon produced will be sold.”

Meanwhile in Manitoba, which boasts one of the first ethanol plants in Canada, the affect on production of high value crops has never been felt. “We’ve had the plant in Minnedosa for years and it has not affected potato production,” Sloik says. However, if additional plants get built and the prices for the alternative crops increase, that may change, but it may only mean that potato growers will now get better returns for their rotation crops.

In the end, the biofuel industry is so new that the full impact has not been felt and is difficult to predict. McKenzie says that potato growing areas that have long needed more viable alternate crops to work into their rotation may finally have them. “Gains could happen in eastern provinces that have been looking for viable rotation crops for years,” he predicts. As well, he adds, if major production areas in the US can make good returns on alternate crops, Canadian growers may need to step up production to fill any voids created.

“Farmers will plant what they can make the most money on,” Lathim states. “Somehow markets will correct themselves. Perhaps the price of food will go up to balance the increased costs of production.” Without a doubt the biofuel industry will have an impact on potato production and, depending on the growing area, it could be negative or positive, but it is too early to predict which it will be. In Canada, the true impact may not be known for several more years. -end-


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