California market | Canadian canola meets the EU’s sustainability requirements for biodiesel feedstocks
After years of unfilled promise, the biodiesel market is poised to become a substantial source of de-mand for canola, says an expert in the field.
Dennis Rogoza, sustainability adviser for the Canola Council of Canada, is most excited about the potential for the fuel in California, but he also believes the European biodiesel market could also consume plenty of Canadian canola.
California passed legislation in 2006 requiring a reduction in state greenhouse gas emissions to 1990 levels by 2020. That will require extensive use of renewable diesel in a state that is home to more people than all of Canada.
Rogoza recently attended a conference in California where a company that works with state regulators provided an estimate of how much canola biodiesel will be used to help meet the carbon reduction targets.
The forecast called for 800 million litres of canola biodiesel consumption in California by the end of the decade.
“I thought, wow, if that is true, if that forecast is even anywhere close, then that would require something like 1.75 million tonnes of canola seed from Canada just to supply that,” said Rogoza.
“That’s a startling number.”
He agreed that canola biodiesel should be a popular choice for the state. Hydrogenation-derived re-newable diesel would likely be too expensive, which means blenders would turn to crop-based biodiesel.
Rogoza said it would be cheaper to transport canola or canola oil from Western Canada than to bring in soy or soy oil from the U.S. Midwest. As well, canola biodiesel delivers better greenhouse gas reductions.
The biodiesel industry has been slow to evolve in Canada, but mandates are now in place in the four western provinces and Ontario, which implemented its greener diesel regulation April 1.
Rogoza is also optimistic about European demand prospects, where canola has suddenly become price-competitive with European rapeseed and imported soy.
The European Union has slapped punitive tariffs on South American soy biodiesel, which should create an opportunity for canola in the world’s largest biodiesel market.
Rogoza helped implement a program in Canada that allows canola to meet the EU’s sustainability requirements for biodiesel feedstocks. About 1,000 farmers are now able to ship their canola or canola oil to the EU for use in the biodiesel sector.
“We think the conditions in fact are ripe for the shipment of canola to Europe in whatever form,” he said.
Rogoza has been receiving calls from traders interested in shipping canola to the EU.
Derek Squair, president of Agri-Trend Marketing, said the landed price of Canadian canola is about $10 per tonne more than European rapeseed, but canola provides more meal than rapeseed, so it should be an attractive feedstock for crushers.
“There is an opportunity for them to import our canola and use it for biodiesel and still make money at it,” he said.
Squair expects the EU to import 500,000 tonnes of Canadian canola through the Port of Thunder Bay for the remainder of 2013-14, which should help reduce what is expected to be a substantial carryout.
Rogoza expected shipments to be a lot higher than that in the future if canola remains price competitive.
“There is growing interest,” he said.
Rogoza said the biodiesel market in Canada, the United States and the EU will become an important source of demand for a crop that the council believes will reach 26 million tonnes of production by 2025.
“It could be a three to four million tonne a year business,” he said.
To put that in perspective, future biodiesel demand could completely mop up this year’s expected carryout of 3.3 million tonnes.
Rogoza said the nice thing about the biodiesel market is that demand may be initially hard to get going, but it is a regulated demand that won’t go away once it is in place. As a result, it is not subject to the whims of international trade.