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WINNIPEG, Manitoba (Reuters) - Ethanol production has boosted the prices of grains that Canadian farmers buy to raise cattle and pigs, and Ottawa should curb or eliminate its support for the industry, an agriculture research organization said on Tuesday.

But a leading biofuels group said the report wildly overstated ethanol's impact on grain prices.

The report conducted by the George Morris Centre and paid for by livestock and meat groups said while many factors influence grain and livestock prices, Canadian ethanol production has boosted feed grains by C$15 to C$20 per ton in eastern Canada and C$5 to C$10 per ton in western Canada.

The result is added costs to livestock farmers amounting to C$130 million ($129.6 million) per year, the report said.

"Everybody says, 'Oh Canada doesn't set the global prices for grain, we're a small player'," said Kevin Grier, senior analyst at the George Morris Centre, based in Guelph, Ontario.

"The whole focus is to try and show that ... ethanol does have an impact. Canada's policies do matter (to grain prices)."

The George Morris Centre has previously published reports on ethanol's impact, but this is the first to quantify its effect on livestock farmers, Grier said.

Ethanol makes up a small portion of demand for corn and wheat and the report overstates its impact on prices, countered Tim Haig, interim president and chairman of the Canadian Renewable Fuels Association.

"Does it have zero impact? That would be naive. But it's minimal," Haig said. "We believe this (impact) is wildly overstated."

The Canadian and provincial governments spend about C$250 million annually, according to the centre, to subsidize ethanol production by companies such as Husky and Suncor, with the aim of cutting greenhouse gas emissions from conventional fuels.

Ottawa requires the gasoline pool to contain an average of 5 percent ethanol.

(Reporting by Rod Nickel; Editing by Dale Hudson)

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