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NOVEMBER 15, 2012 | WWW.PRODUCER.COM | THE WESTERN PRODUCER
MARKETS
CANOLA | INDUSTRY DEBATE
More oil, more cash: growers High protein wheat gets a premium so why not high oil canola? say growers BY SEAN PRATT SASKATOON NEWSROOM
Some canola growers think it is time they were rewarded for producing canola with high oil content. They wonder why crushers refuse to provide a premium for oil when many of those same companies pay for high protein wheat. “I think that’s a question that is worthwhile asking. That’s what we’re selling. We’re selling oil,” said Todd Hames, a director with the Alberta Canola Producers Commission. Richardson International was contacted to provide a crusher point of view for this story but did not respond. Hames said it’s probably time for another industry discussion on the issue, but it could be a tough nut to crack because there isn’t even grower consensus. “Oil content varies by region, so there is a little bit of a regional pushpull on that,” said Hames, who is also president of the Canadian Canola Growers Association. “Some regions that consistently grow higher oil content are more in favour of the premium than some areas that are not as consistently high oil content.” Oil content is largely dictated by cool conditions during the filling stage of development, which is why
canola produced in northern Saskatchewan and the Peace region of Alberta typically contains more oil than that what is grown in southern Saskatchewan and Manitoba. Brett Halstead, chair of the Saskatchewan Canola Development Commission, said the issue comes up every year but the group has never drafted a policy on it, partly because it is such a divisive issue. “It won’t be just premiums. It will be discounts if you’re below,” he said. He worries that a discount for low oil content would discourage producers from expanding into nontraditional canola growing areas, which is needed for production expansion. Hames agreed that processors and exporters won’t pay more for a tonne of oil, which means some growers will receive more and others less than they’re getting today. However, he doesn’t see anything wrong with that. “If you’re producing more oil, then you should get paid more,” he said. “Just like the guys down south — they’re getting, generally speaking, a higher protein wheat so they’re going to get a premium for that wheat over someone in the north.” He doesn’t understand the industry reluctance to pay growers for high oil content. “Really, we’re growing oil. That’s
what we’re growing. We should be looking at oil per acre, not bushels per acre.” He said a shift toward paying growers for the oil in their seeds would have a valuable trickle-down effect for the canola industry. “The breeders would breed for oil content more if the producer was getting paid for it,” he said. Hames said many of the Alberta growers he represents are just as keen about being rewarded for delivering canola with low moisture content. That’s why the commission supports a move to component pricing, which would take into account oil and moisture content as well as other quality factors. Growers are penalized for delivering canola with more than 10 percent moisture, but there is no benefit for providing drier product, such as six percent moisture. “That’s four percent less water that (buyers) are purchasing,” Hames said. “It’s a good deal for them.” Halstead said SaskCanola has never discussed a low moisture premium, but he’s not real keen on the idea. He thinks that would result in crushers lowering the bar from the current 10 percent level because there are years where they would have to pay a premium on almost
The Alberta Canola Development Commission says the oil content issue would discourage production in non traditional areas. | FILE PHOTO the entire crop. “Oil would be the first step,” he said. Halstead added that there is nothing stopping a crusher from imple-
CANOLA CRUSH INCREASING
CANOLA | MARKET EXPANSION
Health benefits keep canola growth humming BY ED WHITE WINNIPEG BUREAU
Stunning growth in canola production and processing isn’t making the industry anxious. “As long as the weather holds up, absolutely (we can produce enough canola to keep the crushers going),” said Sean McPhee, president of Vegetable Oil Industry of Canada. Canadian canola and soybean oil
menting an oil premium, although he doesn’t know if there is an efficient and affordable driveway test available to facilitate such a program.
production has more than doubled since 2005, and a new Cargill crushing plant near Camrose and the expansion of the Bunge plants at Altona, Man., and Fort Saskatchewan, Alta., will further increase capacity and demand. McPhee said the significant growth in production is driven by increasing demand from consumers for healthy oil, which he said includes canola and soybean oil.
“A big part of it is the health profile,” said McPhee. American imports of Canadian vegetable oil have doubled since 2007 and Chinese purchases have tripled. Canola production has increased significantly in the past decade, rising from less than six million tonnes of seed per year to 15 million. The increase is due to high-yielding
hybrids, extra acreage and good crop management, analysts say. The increase in vegetable oil production is the result of processors running at full capacity, something that was not always the case in the early-mid 2000s, and a huge increase in crushing capacity. McPhee said crushing companies are expected to have invested $1 billion in new capacity between 2007 and 2015.
Canola crush in Canada has increased almost 70 percent in the past five years. Canola oil exports have almost doubled. The amount going to the United States has more than doubled and the amount going to China has more than tripled. (000 tonnes) 2007-08 2011-12 Canola crush 4,144 6,997 Oil 1,739 3,126 Meal 2,495 3,967 Total oil exports 1,317 2,600 Oil exports to U.S. 928 1,486 Oil exports to China 249 828 Source: Statistics Canada/Canola Council of Canada | WP GRAPHIC
WEATHER | GLOBAL FORECAST
Deluge of rain delays seeding in France; ruins wheat harvest in Britain PARIS, France (Reuters) — Recent heavy rain could prevent some wheat from being seeded in France and Britain after rapeseed area was lost in the two major European crop producers. The developments add further uncertainty to the global supply outlook, analysts said. How e v e r, G e r ma n y ha s s e e n favourable seeding conditions for both crops, with rapeseed expected to see a jump in area after a difficult seeding campaign last year. A wet October hampered seeding of winter wheat and barley in France, which is the European Union’s top grain producer and exporter. There has been some talk of farmers abandoning plans to seed wheat. “The feedback we’ve had is that in a
zone around the Loire estuary (in western France), people have given up on some wheat sowings,” said Paul Gaffet of the grains consultancy Offre & Demande Agricole. Average rainfall in France last month was 20 percent above normal and the northwest of the country was among those regions that saw precipitation 50 to 100 percent above average, weather forecaster Meteo France said. Analysts had initially expected France’s soft wheat area to recover after a severe frost last winter and to match or slightly exceed the 12.4 million acres seeded a year ago. It was too early to quantify losses. Farmers in northerly regions are used to seeding wheat late following the sugar beet harvest, Gaffet said.
Seeding has accelerated since late October and as of Nov. 5, 80 percent of winter wheat and 93 percent of winter barley had been seeded, according to farm office FranceAgriMer. Recent rain has helped rapeseed, which endured dry conditions during the late summer seeding season, but the moisture was too late to prevent some area being lost. Analysts initially expected strong rapeseed prices would spark more French rapeseed area, but ODA said its follow-up survey on emerged crops suggested reduced area. “In the centre region, rapeseed spent a month in the ground without being able to emerge because there wasn’t enough moisture,” Gaffet said. In Britain, farmers have been grap-
pling with persistent rain since the summer that has already spoiled the wheat harvest and has since disrupted seeding of rapeseed and wheat. The winter wheat area looks set to fall, analyst Jack Watts of the HomeGrown Cereals Authority said. “We definitely are going to be down, but it is too early to put numbers on that because there are still opportunities for farmers to plant the crop,” he said, adding that the optimal planting window had closed. Watts said the weather over the next few weeks would play a key role in determining the extent to the decline in area. “They (farmers) will carry on trying to get it in the ground right up until the New Year, enthused by the strong
forward prices,” he said. Spring barley is the most likely alternative crop if farmers are unable to get winter wheat into the ground. Rapeseed area in Britain is also expected to be lower. A late wheat harvest this summer limited opportunities to plant the oilseed crop, which goes into the ground earlier than wheat. British rapeseed area has risen sharply in recent years, reaching 1.87 million acres for this summer’s crop, up 7.2 percent from the previous season. In contrast, German winter grain and rapeseed seeding has progressed well without major problems, analysts said. Oil World forecasts 11 percent more rapeseed acres in Germany.