QLD ethanol mandate leaves lotfeeders exposed during times of grain shortage

Beef Central, 24/01/2017

Lotfeeders remain deeply concerned about the long-term impact that the Queensland Government’s ethanol mandate from this month will have on Australia’s grainfed cattle sector.

Tess Herbert

Tess Herbert

Australian Lot Feeders Association president Tess Herbert said concern over ethanol mandates related particularly to low grain production years when the inflexible demand imposed by Government mandates would remove a considerable portion of the Queensland grain crop, leaving lot feeders paying artificially higher grain prices.

“While grain production and prices are favourable now, unfortunately poor grain production years will eventually return,” she said.

“With a large portion of Queensland’s ethanol production derived from grain, a return to drought conditions would continue to see grain diverted to ethanol and, under the mandate, see unnatural upward pressure on grain prices.”

“This is because the three percent ethanol mandate delivers the ethanol industry a Government-guaranteed level of sales, with the collateral damage being artificial inflationary pressure on grain prices,” Ms Herbert said.

“The grainfed beef industry doesn’t enjoy the luxury of Government guaranteed sales of meat, and so will need to absorb artificially higher grain prices imposed by the Queensland Government’s legislated sales of ethanol fuel.”

Ms Herbert stressed that lotfeeders were happy to compete against the ethanol industry for grain on a free and open market, but not against an industry which receives a competitive advantage through Government intervention mechanisms such as mandates.

By its own admission the Dalby Bio-refinery had recently stated that in previous years it had to close the refinery for extended periods because the demand for its product was not there, and that the Queensland Government’s mandate had secured the future of the facility.

But the Queensland ethanol mandate is not all good news for everyone.

“The ethanol mandate directly gives the ethanol industry a false economic leg-up at the expense of other agricultural producers,” Ms Herbert said. “As grain is the highest cost in a kilogram of beef, pork, dairy and chicken, higher grain prices negatively affect these sectors as it imposes artificial inflationary pressure on grain prices.”

“Feedlots purchase millions of feeder cattle each year. Any Government intervention which distorts markets and leads to higher costs of production will only reduce feedlot cattle numbers at the expense of such cattle producers and the whole beef supply chain. With climate change predictions set to exacerbate such impacts, the last thing the beef industry needs is negative consequences from ethanol mandates,” she said.

The Anastasia Palaszcek-led Labor Queensland Government is due to go to an election some time in the next 12 months.


Source: ALFA


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