A note on the profitability of wheat-ethanol-feedlot production in Alberta

A risk analysis of the economics of alternative wheat supplies to a small ethanol-beef feedlot facility was conducted, based on historical data from an 18-year period (1978-96). Alternatives simulated were Black, Dark Brown and Brown soil zone locations in Alberta growing either Hard Red Spring (HRS) wheat, Canadian Prairie Spring (CPS) wheat or irrigated Soft White (SWW) wheat to supply a 10 ML per year ethanol plant. The plans would use the coproduct of wet distillers grains in the finishing of approximately 14,000 steer calves per year. Three valuation scenarios were considered: selling ethanol at its market price, inclusion of current current Alberta tax incentive levels for ethanol sale, and sale of wheat to the Canadian Wheat Board as opposed to sale to an ethanol plant. Ethanol facility and total net revenues were highest for the CPS-Dark Brown soil scenario due to its relatively high ethanol yields per tonne of feedstock, and high grain yields per hectare. An integrated feedstock-ethanol-livestock operation selling ethanol at current subsidy (tax incentives) levels will lose money approximately half to two-thirds of the time over the long run. Without subsidies, an integrated facility would lose money two-thirds to three-quarters of the time.