Insufficient export capacity is costing western Canadian canola growers money in lost canola meal sales and farmers should be complaining loudly, says Thomas Mielke.
Meilke is executive director of the widely read food oil publication Oil World, based in Hamburg, Germany.
“You could do more, but the logistics are not in place,” Mielke said here at Ag Days Jan. 17. “And I sometimes ask myself, “Why are the Canadian farmers so quiet?’ You should scream and you should push…
“There is demand in Asia and China and other countries — they need canola meal.
“Canadian exporters don’t sell more at the moment because they cannot get the freight and they cannot get the space.
“And you (farmers) are losing money. Don’t you realize that?”
It’s not quite that dire, says Chris Vervaet, executive director of the Canadian Oilseed Processors Association (COPA), which represents Canada’s canola- and soybean-crushing companies.
“His (Mielke’s) comments… are probably a little bit overstated with regards to capacity issues on the oil and meal side,” Vervaet said in an interview Jan. 25. “But I will say… we have some concerns as an industry that there is a lack of dedicated capacity to move meal pellets offshore.
“I won’t say that it has necessarily resulted in any lost sales in the recent past, or even going forward, in the next little while. But it certainly is on our radar that there isn’t enough dedicated capacity to f.o.b. meal in Vancouver for the purposes of shipping offshore, primarily into Asian markets.”
Traditionally most Canadian canola meal, fed to livestock as a protein supplement, is exported directly by rail to customers in the United States. In calendar year 2015 the U.S. imported 3.6 million tonnes of Canadian canola meal, according to Statistics Canada, accounting for 95 per cent of the almost 3.8 million tonnes exported.
In the first 11 months of 2016 the U.S. imported 3.2 million tonnes of Canadian canola meal, but during the same period China imported more than 597,000 tonnes, compared to none in 2015.
“We are seeing quite a bit of meal move through Vancouver with the destination ultimately being China,” Vervaet said. “We have seen a real spike in our meal exports offshore this year.”
The U.S. is, and will remain, a very important market, he added.
Between the start of the current crop year Aug. 1, 2016 and the end of November 2016, China imported more than 277,000 tonnes of Canadian canola meal versus 320,000 in total during the 2015-16 crop year that ended July 31, 2016.
Speaking to reporters later, Mielke said a lack of export Canadian capacity is not new — an allusion to the grain-shipping backlog that developed in the 2013-14 crop year. That prompted the federal government to set grain movement minimums the railways had to haul or face fines.
Mielke also said while the Port of Vancouver is adding export capacity, it’s too slow.
“Farmers are reacting to the price signals in the world market by expanding production,” he said. “It is important that the infrastructure develops in the same way.”
Mielke said part of the problem is red tape slows the building process.
A couple of companies in Vancouver, not owned by COPA members, store and load meal for export, but more capacity is needed, Vervaet said. It isn’t clear who should build it.
“The capacity issue on meal is something that has been identified broadly by my members, but what to do about it and who should do something about it, I am not privy to that information,” Vervaet said.
Building in Vancouver is slow because land is scarce and expensive, he said. Investors want assured returns.
“It is not an easy undertaking,” he said. “It takes many, many years. There are environmental reviews that are required to build these type of facilities in the greater Vancouver area.”
Mielke said Canada, which is the world’s biggest canola exporter, needs more export capacity for raw canola.
“The world needs it,” he said. “The global outlook for rapeseed and canola is relatively tight for 2017-18. But you have to have the capacity to ship 12 million tonnes of canola, which you don’t have.”
Wade Sobkowich, executive director of the Western Grain Elevator Association (WGEA), disagrees, noting Richardson and other companies have expanded capacity at Vancouver and others are planning more.
Two grain industry officials, who asked not be named, said they believe the West Coast, which includes the Port of Prince Rupert, can export 12 million tonnes of canola.
According to Agriculture and Agri-Food Canada, Canada exported 10.2 million tonnes of canola in 2015-16, most of it via the West Coast.
Sobkowich said this crop year he hasn’t heard from any of his members about lost canola sales due to capacity constraints.
Where there is a constraint it is rail transportation, Sobkowich added. This crop year the railways have been keeping up with grain company demand, but WGEA members worry when other rail traffic picks up, grain service will suffer, he said.
“Right now grain sales are driven by rail capacity and not sales capacity,” Sobkowich said. “We’re not missing sales now, but could we sell more if there were more cars? Yes.”
COPA has similar concerns, Vervaet said.
“We think to a large extent that is where there’s a gap in capacity, certainly on the service side from time to time,” he said. “Not to take anything away from what the railways’ performance has been of late. But it is not always that consistent and that is a big issue for us.”
That’s why both the WGEA and COPA want the Canada Transportation Act amended so that when the railways fail to meet contractual commitments they are subject to financial penalties. The associations also want the definition of ‘adequate and suitable’ service under the act clarified and the extended interswitching limit implemented to encourage railway competition, made permanent.
The federal government has promised to introduce amendments to the act this spring.