Canola sector ponders risk in pushing for oil premium

Canola sector ponders risk in pushing for oil premium

The Saskatchewan Canola Development Commission has passed a resolution to determine whether farmers should push for premiums based on oil content of their canola.

SaskCanola will be investigating the positives and negatives of component pricing and reporting back to growers.

The group has contracted an independent industry expert to study the issue. Results are expected in early spring.

Gerrid Gust, a farmer from Davidson, Sask., tabled the resolution at SaskCanola’s annual general meeting held at CropSphere 2014.

“As an industry, we’re aiming for high oil content and farmers are not getting paid for it,” he said in an interview.

The mean oil content of the 2013 crop was 44.9 percent, which is close to the record of 45.2 percent set in 2011.

Gust said crushers are the ones benefitting from the steady trend toward high oil canola.

“I think they’ve been getting a pretty good deal for a while,” he said.

Gust believes it is time growers received financial encouragement for producing canola with high oil content.

“The Saskatchewan Canola Development Commission has to really focus on the growers. The big companies of the world have no problem staking out their territory,” he said.

Joan Heath, who was chair of SaskCanola when the debate on the resolution took place last week, said the board of directors is divided on the issue.

Some growers on the board wonder if marketing canola based on oil content might come back to bite them.

“Say I have a drought and that’s going to mean that my oil content is really low: that’s a double whammy for me,” she said.

The Alberta Canola Producers Commission supports component pricing, while Manitoba Canola Growers says it depends on where the cut-off percentage is located.

Gust said it’s an east-west issue because oil content tends to be higher the further west one goes. He believes the divisions on the SaskCanola board are split along similar geographic lines.

SaskCanola director Frank Groeneweg, new chair of the commission, said research shows growers have little impact on oil content.

“It’s mainly a weather component,” he said. “There is a risk for us to just put another variable that we don’t control into the pricing of canola.”

He said it’s not like wheat, where growers can influence protein content through agronomic practices, such as how much nitrogen they apply.

Groeneweg also worries growers will take additional risk when they contract to deliver a specific oil content but are unable to meet the specifications come harvest.

Wayne Bacon said higher oil content means lower protein content in the meal. The two can offset one another, resulting in the grower being paid the same amount for his seed.

Heath said the lack of agronomic influence on oil content is the primary concern for many board members.

“We’re just a little conservative on this right now because we don’t see that science, and we’re science based,” she said.

Larry Weber, analyst with Weber Commodities Inc., has advocated for a shift to component pricing. He said growers are leaving millions of dollars on the table.

Weber said component pricing is used in Australia and the European Union. His calculations show that Canadian growers would have received an extra $18 to $20 per acre this crop year if Canada had the same oil premiums Australia has in place.

“Farmers can voice their discord with the industry’s position they have taken or sit back and watch money being extracted from their pocket, just as protein wheat was in the 1970s,” he said.