U.S. crushers will remain heavily reliant on Canadian canola this year, says a buyer for one of the plants.
“Our requirements for the total tonnage is going to be going up because we’re increasing our crush,” said Derek MacLean, Manitoba grain buyer for Northstar Agri Industries, which operates a crush facility in Hallock, Minnesota.
The plant will soon be processing another 200 tonnes of canola a day, or about 70,000 tonnes per year. Most of that will come from Manitoba.
Northstar is paying Manitoba growers a five percent premium over its spot pricing to grow a selection of high oil content varieties. It believes the incentive will expand its reach in the province.
The company also offers basis levels that are $20 per tonne better than the competition in southern Manitoba after taking the freight disadvantage into account.
Jack Froese, a farmer from Winkler, Man., hasn’t delivered canola to the Hallock plant, but he has benefited from the demand generated by the new facility.
“It has certainly pumped the pricing up our way a little bit with the basis,” he said. “Throughout the winter they had some pretty good pricing when our pricing wasn’t that great.”
Froese hasn’t sold canola to the plant because of the red tape associated with trucking the crop across the border.
MacLean said four major crushers operate in Minnesota and North Dakota, which source 90 percent of their canola from Manitoba.
That important source of demand won’t be disappearing anytime soon, based on seeding intentions for the United States.
U.S. growers intend to plant 1.74 million acres of canola, which is up 29 percent from last year. That sounds like impressive growth, but 2013 was an anomaly because farmers in North Dakota were unable to plant as much of the crop as they hoped because of wet conditions.
A better comparison is from two years ago, especially in North Dakota, where farmers intend to seed 1.27 million acres this year compared to 1.46 million acres in 2012.
Legumex Walker operates a crush facility in Warden, Washington. The company was hoping for a big increase in canola acres in the Pacific Northwest.
Growers in Washington, Oregon, Idaho and Montana intend to plant 147,000 acres of the crop, which is down from 166,000 acres in 2013.
The company recently expanded its trucking program beyond the Pacific Northwest into the Canadian Prairies in an effort to increase supply that has been restricted by poor rail service.
MacLean can’t understand why growers in North Dakota are shunning the crop, given that there is a market for the product in their backyard.
“I was talking to our agronomy manager the other day and he was saying the same thing. He can’t understand why.”
MacLean’s best guess is that the $2 per bushel premium for growing soybeans is keeping farmers from experimenting with canola, which is an unfamiliar crop for many growers.
“It’s a relatively new product down there. It hasn’t been around for 25 years like in Western Canada.”
MacLean anticipated a better acreage response in the U.S. next year.
“I think the soybean-canola spread is going to narrow up in the new crop. Then we’ll be on a level playing field challenging for acres next year down there.”