Bunge’s plan to more than double the capacity of its canola-crushing plant at Altona to 2,500 tonnes a day is good news for farmers, but it also means they’ll have to grow more canola.
“We’re always glad to see investment in the canola crush because it creates demand and more demand must mean they are developing more markets,” Manitoba Canola Growers Association president Rob Pettinger said in an interview last week.
Canola supplies could be tight next year due to reduced product ion this year and increased plantings of crops other than canola in 2011, said Derek Brewin, an agricultural economist at the University of Manitoba.
“We’re looking at long-term growth trends and this won’t go online for a couple of years,” said Bunge spokeswoman Deb Seidel. “We’re not reacting to today’s market, we’re anticipating what the future market is going to hold.”
The Canola Council of Canada’s (CCC) goal is for Canadian farmers to routinely produce 15 million tonnes of canola annually by 2015. That goal is in reach, said Dave Hickling, the CCC’s vice-president of canola utilization, despite this year’s setback due to a wet spring, summer and fall.
“Big acres were in, it’s just that a lot of it was lost so unfortunately instead of getting 13 million or 14 million tonnes we’re going to get closer to a 11 million tonnes – that’s the estimate at the moment,” he said.
Western Canada produced an average of 10.75 million tonnes of canola the last four years, excluding 2010.
An additional 1.7 million tonnes a year of crushing capacity was added with the recent construction of two plants in Yorkton, Sask., bringing total Canadian capacity to more than seven million tonnes a year.
Altona’s expansion from 1,100 tonnes a day to 2,500 by late 2012 will add more than 500,000 tonnes of new capacity.
“The fact that Bunge has just announced this expansion is a reaffirmation that the market demand continues to be there,” Hickling said.
Altona is located on the eastern edge of western Canadian canola production, and is the farthest from the West Coast where canola seed prices are usually the highest. But it’s closest to the United States where the demand for canola oil and meal continues to grow.
Brewin isn’t as optimistic as the Canola Council of Canada about production keeping pace with crushing capacity.
“They’ve seen a really big increase (in acres and production) lately but it’s hard to imagine this continuing,” Brewin said. “These other crops like soybeans and corn will start to steal acreage, and it’s hard to see wheat just disappearing.”
Next year Brewin expects wheat acres in Manitoba to jump because of high prices now.
Soybean acres are expected to increase too because they seem to handle excessively wet conditions better than canola.
Tight supplies of canola in the future will bolster prices, but only so much because canola oil and meal have to compete with other vegetable oils, Brewin said. If domestic crushers start losing money it could result in a plant being mothballed until profits return.
On average, Manitoba farmers produced a little more than two million tonnes of canola between 2005-06 and 2009- 10. The expanded Altona plant alone could process more than 40 per cent of that.
The canola industry is aware farmers have crop choices, Hickling said.
“We’re pretty confident that canola will retain its competitiveness versus other crops,” he said. “The amount of investment into developing new varieties of canola that are higher yielding, that have superior agronomic characteristics, is quite remarkable and that helps canola keep its competitive position.”
Seidel declined to say how much the Altona expansion will cost. More details about the expansion and when it will begin will be announced before the end of the year, she said.
Ideally, crushing capacity and canola production will grow in tandem, but that’s something no one can control, Hickling said.
In the 1980s Western Canada crushers bled red ink, partly due to excess capacity, as well as other factors, including subsidized oil exports from the European Union and United States, protectionist measures blocking Canadian oil exports to Japan and the high cost of raw canola seed relative to the return from the processed oil and meal.
CSP Foods Ltd. , which was owned by Manitoba Pool Elevators and Saskatchewan Wheat Pool, recorded a net loss of $15.55 million between 1980 and 1989. Bunge now owns CSP Foods’ facilities. [email protected]
“Theseothercrops likesoybeansand cornwillstartto stealacreage,andit’s hardtoseewheat justdisappearing.”
– DEREK BREWIN