Biofuels production in Canada has been quite low, but that's about to change.

Canada consumes about 10.5 billion gallons of gasoline annually. According to the Canadian Renewable Fuels Association (CFRA), the 2004 ethanol production and consumption was approximately 66 million gallons, or well under 1% of gasoline sales.

That production was coming from three plants in Ontario and one each in Manitoba, Saskatchewan and Alberta.

Canada's new Conservative government announced a plan to have all Canadian gasoline contain 5% ethanol by 2010.

Construction of new or expanded ethanol facilities already is underway from Quebec to British Columbia.

Under the previous Liberal government, federal support was announced in 2004 and 2005 for at least 11 ethanol plants. Production capacity ranges from 3-50 million gallons per year. Those facilities are expected to kick Canada's ethanol annual production to approximately 370 million gallons by the end of 2007.

More projects are in the works. For instance, Ontario approved funding for three projects that already had federal support — but another nine projects were waiting in the wings. The three ethanol plants — including two farmer cooperatives — were appropriated $32 million from a $520 million fund designated by the province to support ethanol growth.

A conservative target is that by 2010 Canada will be pumping out 800 million gallons of ethanol. The target calls for 35% of sales in 2010 to include a 10% ethanol blend.

By that point, a 10% standard could be the minimum blend.

Vehicles on the assembly line today have full warranty for at least a 10% ethanol blend. And, North America already has four million flex-fuel vehicles on the road, rated for full warranty with an 85% ethanol blend in the tank. A million of these E-85 vehicles are being built each year.

The farm impact should be huge. Primary sources will be Ontario corn crops and Prairie wheat crops.

Demand for industrial grade corn and wheat currently is about 25 million bushels. That market may jump to approximately 140 million bushels from the 2007 crop and perhaps 300 million bushels from the 2010 crop.

Investments in ethanol plants are very attractive for farmers who organize and own cooperatives that operate the production facilities, says Tom Cox, Integrated Grain Processors Cooperative chair, BrantfordAylmer, Ont.

“As a corn producer, I can't make money selling corn at CDN $2.50/bu. But, if I invest in an ethanol plant, I can hedge some of the risk. If grain prices go high, the ethanol plant makes less money; if the price of corn goes down, we're making money by processing the crop and adding value to it,” Cox says.

In Central Canada, high corn yields and short shipping distances are already attracting large-scale ethanol investment. These ethanol plants being built in Ontario and Quebec will need to compete for a limited corn supply, one that's now serving the regional livestock industry.

In the West, half of Canada's farmland is in cash-strapped Saskatchewan. And, it's cheaper to ship one railcar of biofuels than the equivalent 3.6 railcars of wheat or canola.

In short, says Lionel Labelle, president, Saskatchewan Ethanol Development Council, Saskatoon, it's possible that a third of Saskatchewan's total crop production will be processed into new biofuels in just a few years.

Labelle adds, “We have to grow things that the world needs, other than food, and energy is one of those things.”