Canola crushers are running flat out to keep up with overwhelming demand from domestic and export customers.
For the week ending Feb. 20, which is a little over halfway through the current marketing campaign, crushers had chewed through 2.23 million tonnes of seed, 15 percent more than last year’s record-setting pace.
“I really can’t see any reason why we wouldn’t post a (new) record,” said James Rea, director of bulk product sales with Canbra Foods Ltd., the world’s first marketer of canola oil.
He forecasts total crush will finish about 15 percent above last year’s record 3.58 million tonnes.
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“Unless something exotic happens, like China steps in and buys an exorbitant amount of seed and forces out crush, that would be one of the few things that might knock that number down,” said Rea.
Bob Broeska, president of the Canadian Oilseed Processors Association, agrees with that assessment.
The outlook is for continued strong domestic demand due to food service companies continuing to switch to liquid and blended oils containing canola from partially hydrogenated soybean oil.
A rapidly expanding middle class in India and China should lead to a sustained and robust export program as consumers in those populous countries demand more vegetable oil. Also, they’ll need canola meal for the livestock they will eat.
Finally, there is a lot of money invested in biodiesel plants around the world that are going to require oil-based feedstock.
“That bodes well for future demand for vegetable oil,” said Broeska.
According to COPA, canola crushers have been running at 92.6 percent capacity year-to-date compared to 90.8 percent a year ago.
Rea said when the numbers top the 90 percent level, it means crushers are operating at full capacity because there has to be some down time for annual maintenance.
Net cash margins are at a level where crushers would be foolish to curtail production, with the vegetable oil market on a steady climb since the fall of 2006.
“I don’t see any reason for people to be operating below capacity unless they’re having operational problems or seed sourcing issues,” he said.
By contrast, soybean crushers in Ontario and Quebec have been operating at 67.4 percent of capacity and are 80,584 tonnes below last year’s crush pace.
“In an oil-driven market such as the one we have it’s more advantageous for the canola guy than it is for the bean guy and you can see that in the numbers,” said Rea.
That’s because canola seeds produce more oil and less meal than soybeans.
Rea believes the heightened value of canola in this oil-driven market is adequately reflected in the price signals growers have received, which should result in a boost in 2008 acreage.
Agriculture Canada projects canola acres will climb 13 percent to 14.7 million in 2008. Rea has seen other industry forecasts ranging from 14 to 15.5 million acres.
“Given this market, I think that is in line with expectations,” he said.
