Farmers are counting on them. The Canola Council of Canada is counting on them. And the city of Yorkton is counting on them.
But there simply isn’t enough canola grown in the area surrounding the eastern Saskatchewan city to support two massive new crushing facilities, says the president of the Canadian Oilseed Processors Association.
“There is some skepticism still that two companies are going to duke it out in Yorkton, if the truth be told,” said Bob Broeska, president of the Canadian Oilseed Processors Association, a group that represents ADM Agri-Industries Co., Bunge Canada, Canbra Foods Ltd. and Cargill Ltd.
Read Also
Agriculture ministers agree to AgriStability changes
federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
“It doesn’t make any sense.”
Louis Dreyfus Canada and its partner Mitsui & Co. intend to build an 850,000 tonne plant that will be operational in the second quarter of 2009.
James Richardson International expects its 840,000 tonne plant will be up and running one year later, in the second quarter of 2010.
Both companies insist they are going ahead with their projects and that there is enough canola grown in the area for both of them to prosper.
But Broeska said between those two plants and the nearby Bunge Canada plant in Harrowby, Man., there will be an annual demand for more than 2.5 million tonnes of seed in a region that doesn’t grow two million tonnes of the crop.
Unless farmers in the area significantly tighten their rotations, the three companies will be competing so fiercely for product that margins will constantly be under pressure. That’s why Broeska believes one of the grain companies may not proceed with its plans, especially in light of rising construction and labour costs.
“Somebody may blink,” he said.
He also feels Louis Dreyfus’s plan to be operational in the second quarter of 2009 is overly ambitious.
“I can’t see that,” said Broeska.
Brant Randles, president of Louis Dreyfus Canada Ltd., takes issue with Broeska’s comments.
“Construction is going as planned. We still anticipate we’ll be substantially complete in the early summer of 2009.”
The $120 million US plant was originally scheduled to open in the last quarter of 2008. It will be 60 percent owned by Louis Dreyfus and 40 percent by Mitsui & Co., a Japanese trading house that is Louis Dreyfus’s largest customer.
Randles said there have been delays because of rising costs, but the LDM Foods Ltd. plant will be receiving and crushing canola seed in August and September of 2009. Buildings are being erected and foundations completed at the site.
“There is going to be substantial progress in the next four months,” he said.
Randles disputed Broeska’s assertion that there isn’t enough canola to go around.
“The area can definitely sustain two additional plants,” he said.
“We’re very confident we can procure our full crush even with a second plant situated right next door.”
Jean-Marc Ruest, spokesperson for James Richardson International, said the company has completed all of the underground infrastructure work at its site and the pouring of foundations will be done by freeze-up.
“We’re well into the production plan and on schedule,” he said.
The $100 million plant is scheduled to be running by mid-2010.
JRI owns Canbra Foods Ltd., Canada’s largest fully integrated canola crushing plant located in Lethbridge, Alta. The Yorkton plant will triple JRI’s canola oil production.
Ruest said JRI has the ability to source canola from outside the Yorkton region through its extensive elevator network, so grain procurement isn’t going to be an issue.
“We know for sure we’re building ours,” he said.
Cargill Canada was contacted for this story but did not respond. The company is building a 750,000 tonne expansion to its facility in Clavet, Sask. Completion of the plant was scheduled for November 2008 but there is speculation that the opening will be pushed to the second half of 2009.
