Neither of the two massive canola crushing plants to be built in Yorkton, Sask., is going to meet its original deadline of being operational in late 2008.
Louis Dreyfus Canada Ltd. is pushing back the timeline on its 850,000 tonne facility.
“We are targeting a completion for the second quarter of 2009,” said company president Brant Randles.
James Richardson International’s slightly smaller 840,000 tonne project will be later than that.
“I guess the best I can say for timeline is as soon as possible. We’d like to be in a position to go forward with construction starting this spring or summer,” said Jean-Marc Ruest, vice-president of corporate affairs.
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He said the JRI plant will be the same size as originally announced and will take 18 to 24 months to build, which pushes the opening back to late 2009 or early 2010.
Ruest doesn’t consider being second out of the gate a setback despite at one time saying their project was considerably ahead of the Louis Dreyfus project.
“At the end of the day we’re not terribly concerned what other people’s projects are doing,” he said.
A third project, the 750,000 tonne expansion of Cargill’s plant in Clavet, Sask., is under construction and should be completed by November 2008, according to the company’s latest news release on the subject.
Randles said site work on the Louis Dreyfus plant was completed last summer, but the company was unable to get its engineering work done in time for a 2008 opening. All the major equipment has been ordered and will begin arriving in Yorkton in March, with foundation and structural work scheduled to begin in May.
The initial business plan called for a $90 million capital investment. Randles wouldn’t provide details on the latest cost other than to say it will be more than $100 million.
Ruest said JRI is revising its plans in an attempt to bring costs in line with the original estimate of $100 million. The first quotes received came in “significantly higher” than that.
“We are looking at ways of either making our plant run more efficiently or using different types of material,” he said.
Both projects require a significant outlay of capital but the timing couldn’t be better for building a crushing plant. The Chicago Board of Trade’s March soybean oil contract has risen over 50 percent in the past five months to 63.6 cents per pound Feb. 25 and canola oil is trading at a premium to that.
According to the Canadian Oilseed Processors Association, the margins in the crushing business are allowing canola plants to operate at what amounts to full capacity. As of Feb. 20, they had crushed 2.23 million tonnes of the oilseed, 15 percent ahead of last year’s record-setting pace.
“We’re reasonably optimistic that with the growth in the food oil sector and biofuels, the margin environment will remain very robust,” said Randles.
Burgeoning demand for vegetable oil in China and India is coupled with strong North American demand for oils free of trans fats for the food service sector.
“In the vegetable oil space, canola has a very, very positive outlook going forward because of its profile,” said Randles.
That’s why he isn’t lying awake at night worrying about overcapacity in a canola crushing sector that is about to add 2.44 million tonnes of capacity. He doesn’t foresee any attrition in the industry. In fact, the company’s original business plan counted on a similar-sized facility being built somewhere in the country.
“We didn’t think that somebody would situate next door, but we did contemplate an expansion in capacity of that magnitude, so it’s not a big concern to us,” said Randles.
The only area of concern is on the biofuel front, said Bob Broeska, president of the Canadian Oilseed Processors Association.
Crushers are looking with some trepidation at Europe, where biodiesel capacity exploded to 10.3 million tonnes in 2007, up from slightly less than two million tonnes in 2004. The problem is, only half of that capacity is being used.
“So there has to be some hurt there,” said Broeska.
They also look at the Canadian market where there have been plenty of biodiesel plant announcements but little in the way of capital investment.
“There are questions. Absolutely, there still are questions,” said Broeska.
Representatives of both Yorkton projects say they are not overly concerned about what happens with biodiesel demand because they will be producing refined oil for the food market.
“If there were changes in the biodiesel world, does it affect our plant? I would say, I don’t think so,” said Ruest.
