Western Canada will soon be able to crush a lot more canola, and Chris Vervaet is confident the seed will be there to do it.
“We believe there will be a supply response to this demand pull that we are seeing for canola and canola products,” Vervaet, executive director of the Canadian Oilseed Processors Association (COPA), said in an interview April 26.
Canada’s canola-crushing capacity of 11 million tonnes will jump by 4.6 million tonnes, or almost 42 per cent, to 15.6 million by 2024 thanks to two new plants just announced and the expansion of a third — all in Saskatchewan.
“How that all plays out as to how much goes to crush and how much goes for export and will it come from increased acres or from yield, I don’t have an answer to those questions specifically, except to say there has always been a supply response when there has been a pull on demand for our products,” Vervaet added.
Why it matters: More domestic crush capacity means potentially increased demand for canola, higher canola prices for farmers and a boost to Canada’s economy.
April 26 Viterra announced it’s going to build the world’s biggest canola-crushing plant with 2.5 million tonnes of capacity at Regina.
Four days earlier, Cargill announced plans to build a one- million-tonne canola crusher, also at Regina.
And a month before that Richardson International said it will double the capacity of its crushing plant at Yorkton to 2.2 million tonnes annually.
“Certainly these announcements put us definitely on that path towards meeting that 14-million-tonne (of crushing capacity by 2025) target,” Vervaet said. “My first reaction, even after seeing Richardson’s announcement of almost a month ago and with these other two in the last few days, it really speaks to the continued confidence that the members (of COPA) have in the canola industry in Canada. It’s about adding more value here in Canada. It’s good for farmers in terms of providing more delivery options, driving local demand for canola. It’s great for the local communities in terms of providing employment opportunities. And then just generally speaking when you can add more value in Canada it’s good for the economy as a whole. My reaction to these announcements is that it’s such a good news story for the industry and frankly speaking in general the Canadian economy.”
Canadian crushers have been working at 90 per cent capacity — essentially full capacity after taking into account time for maintenance and the occasional logistical problem — the last 12 to 18 months processing a record 10.3 million tonnes in calendar 2020. That broke the previous record of 9.6 million tonnes set in 2019 and the records set the two previous years.
Last year Canada’s 14 canola-crushing plants processed about half the 20 million tonnes of canola seed Canadian farmers produced.
“That really tells the story for what the demand has been for canola products,” Vervaet said.
Adding capacity raises questions about whether farmers will increase production, especially when some farmers have already shortened their rotations, running the risk of reduced yields due to greater insect and disease pressure.
Saskatchewan, where the bulk of the capacity is being added produces almost 54 per cent of Canada’s canola, or 10 million to 11 million tonnes. However, it is only crushing about four million tonnes.
“So we’re not even crushing half of what’s grown in the province yet,” Vervaet said. “There’s lots of supply in terms of Saskatchewan.”
If Canadian canola seed production doesn’t keep pace with the demand, it’s possible some seed buyers will import canola oil and/ or meal instead, he said. However, based on history, Vervaet expects Canadian canola production will continue to increase. The Canola Council of Canada’s goal is 26 million tonnes of seed by 2025.
There is demand for more canola products and that’s why Viterra is building a new plant, it said in a news release. In addition to the traditional food and feed markets, demand is growing for canola oil in renewable fuel.
“The additional production (from Viterra’s new plant) is vital to support the federal government’s intended Clean Fuel Standard, which aims to help reduce Canada’s greenhouse gas emissions,” Viterra’s release says.
That fuel standard, which is expected to be finalized by year’s end, will mandate fuel refiners to reduce the “carbon intensity” of fuel sold in Canada, Vervaet said.
“One of the ways to achieve that mandate and lower the carbon intensities of the fuels is to use lower-carbon fuels like renewable diesel, which can be produced from different field stocks, including canola oil,” he said. “As an industry we do see that as a significant potential opportunity in the coming years just in terms of what that demand draw could be… ”
Canada’s Proposed Clean Fuel Standard is estimated to result in a nine per cent biofuel blend rate in diesel by 2030, according to a study by the World Agriculture Economic and Environmental Services (WAEES) released in November 2020 and referenced on the Canadian Canola Growers Association’s website.
The estimated price impact on canola was calculated to be a $48.55-a-tonne or $1.10-a-bushel increase.
The current blend rate is two per cent, Vervaet said.
Thirty-one years ago Canada’s canola-crushing industry was struggling with “life-and-death issues,” Jack Smythe, then vice-president and general manager of United Oilseeds Ltd. in Lloydminster, Alta., said in an August 1990 interview.
Back then a high Japanese vegetable oil import tariff was blocking Canadian canola from entering the country.
In addition crushers complained the federal government’s decision to pay the annual $720 million Crow transportation subsidy to the railways instead of farmers kept canola prices higher than they would otherwise be making it difficult for domestic crushers to buy and process canola seed.