Thank you very much for the question.
Certainly I mentioned it in my comments, and I've written it in several papers as well, that from consequences from the United States a huge expansion in ethanol is what's driving the grain prices around the world. The U.S. policies and actions are having far more influence than anything we're doing here in Canada. In Canada new ethanol plants create a few local effects, but in fact we would have pretty much the same grain prices whether we had ethanol plants or not.
The U.S. is spending an awful lot for this policy, and they're going to continue to spend a lot. They've made that clear. They're in quite a different situation from what we are. They're mired in Middle East conflicts, and this is a big attraction for them to reduce their dependence on oil. Of course they're not going to be able to reduce their dependence on import oil to any significant extent. About 3% of their gasoline consumption comes from renewable sources. President Bush has the 20-in-10 plan in the 2007 state of the union message, which would require almost five times the level of ethanol production as there is today, but I don't believe they can reach that level. Even if they do, they'll only get to 15% of their gasoline consumption. Agriculture will be completely changed if they ever get to that level.
As for your question about whether Canada should do this or not, just because the United States is doing it, I think we have to ask ourselves why we are doing that. We are not dependent on foreign energy supplies. In fact we're large net exporters of most forms of energy, including oil, gas, coal, hydro power, and many forms of energy. This is going to be costly for Canada to do this policy. I believe it will make the effects more difficult for some of the value-added processing industries in Canada.
I think it's something Canada should have looked at more carefully before it went down this path. I think we don't have the same urgencies as some of the other countries, and I'm not sure whether we want to continue to bankroll it. This industry is going to become very expensive; I have no doubt about that. Because of the high price of corn and feedstocks, even the ethanol industry in the United States is becoming close to unprofitable now. Our construction costs are significantly higher than they are in the United States. We tend to build smaller plants that don't have the economies of scale. In fact in several provinces there are numerous programs to try to help farmers invest in very small plants. These are going to become very high-cost plants that are going to have all kinds of financial fallout and require continued government support as we go forward.
It's an expensive policy. We can do it, but I think we should have taken a better look at it first.