Australia the big loser if ethanol mandated - AUSTRALIA - The Livestock Feed Grain Users Group (LFGUG) has called on all Australian governments to be cognisant of the serious effects that a mandated / subsidised grain-based ethanol industry will have on all Australians through adverse knock on effects it will have on all sectors of agriculture - including the grains industry.

Mandating or even subsidizing ethanol will not lead us to the 'promised land' as many of its proponents would have us believe by promoting activity and creating employment in regional Australia, or delivering a range of other environmental and health objectives; rather it will have a serious negative impact on Australia's balance of payments by lowering exports of high-value livestock products; lead to a severe contraction in grain exports, which may require substantial structural adjustment in the wheat industry, and increased imports of grain

These effects are contained in a report released today by the Centre for International Economics (CIE). The report titled 'Impact of ethanol policies on feed grain users in Australia' was commissioned by Meat & Livestock Australia (MLA) on behalf of the cattle industry.

The LFGUG is an alliance of the pork, cattle lot-feeding, dairy, chicken meat and egg industries, who collectively represent the biggest customers of the grains industry. Over the past twelve months LFGUG have been active in making politicians, Government regulators, and other stakeholders aware of the potential impacts of an ethanol mandate in Australian fuel. This, along with a subsidy back to the ethanol producer through the refund of excise levies, would create an artificial demand for feed grain at the expense of the current grain-dependent industries.

The CIE report outlines a large number of drawbacks if any government in Australia should mandate the blending of Australian-produced ethanol with fuel sold to domestic consumers. Alarmingly the report's analysis clearly shows that the sale of blended ethanol fuels is mandated, that in the logical response by a competitive market would be to import ethanol. And if public policy should prohibit the importation of ethanol, the next most competitive option may be to produce ethanol from imported grains, which would seem to be inconsistent with some of the wide range of policy objectives aimed at promoting biofuels.

The report also addresses in detail the effects of high grain prices on the prices that cattle producers would receive. Producers' price could fall as much 90¢ per kilogram liveweight in times of drought. Similarly, the effect on the grains industry could be just as severe during times of drought - a severe contraction in grain exports would occur, while increased grain imports would be required to meet the estimated 12.1 million tonnes of grain required under a 10% ethanol mandate in 2010. It also lays to rest the myth that ethanol will generate a valuable stock feed by-product creating a win/win scenario since the nutritional content is inadequate to meet the feeding ration requirements of intensive livestock industries.

The LFGUG believes that this report shows the irony of the whole debate when it indicates that exports of grain will fall, offsetting any positive balance of payment effects, from reduced fuel imports.

Kathleen Plowman, Chair of the LFGUG, called on all politicians, agricultural producers and stakeholders to obtain a copy of the CIE report to fully understand the implications of subsidising or mandating the use or production of ethanol in Australia. It is an absurdity to pursue a public policy which will ultimately cost Australians more. The Australian government has been steadily reducing levels of industry assistance, requiring industries to stand on their own two feet in world markets. Mandated or subsidised ethanol produced from grain, will distort competitive market forces and impede Australia's ability to sell its primary and value added food products on the international market.

Source: Australian Pork - 30th August 2005