SAN FRANCISCO, Calif. (Reuters) – Saskatchewan’s new canola crushing plant is processing at 80 to 90 percent capacity and is expected to reach full speed this spring.
The Yorkton plant, which is owned by Louis Dreyfus Canada Ltd. and Mitsui & Co., has an annual capacity of 850,000 tonnes and is the first of two scheduled to open in Yorkton this year.
James Richardson International plans to open its plant this spring.
The plants will sharply boost domestic demand for canola, which has seen exports of seed to China and meal to the United States run into trade barriers in the past year.
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Despite the export restrictions, Louis Dreyfus president Brant Randles expects Canadian farmers to plant another big crop this spring because of its better returns than cereals, which will offer the new plants “adequate” supply.
“There might be occasional supply stresses if you have a regionalized weather event, but we really don’t believe that there should be too many supply stresses in Western Canada given the overwhelmingly competitive position the crop’s in, vis-a-vis other cereals,” Randles said on the sidelines of the Canola Council of Canada conference in San Francisco.
He said the plant is targeting supply mainly from a radius of 150 to 200 kilometres around Yorkton, a key canola-growing area.
With returns for canola strong, there is room for farmers to intensify growing rotations to favour canola and expand supply, he added.
In the last few months, Asian demand has been strong for canola oil and meal, giving the industry an alternative to the United States, Randles said.
The U.S. is the top export market for both canola products.
Chinese restrictions on canola with blackleg disease and U.S. refusals of Canadian canola meal with salmonella bacteria have weighed down ICE canola futures in the past year, but the negative news has stimulated the volume of futures trading, Randles said.
The impact of the new plants on futures is also not simple.
“Whether it’s an exporter or a crusher (buying the crop), I don’t think that has a material impact on volumes,” he said.
“What really affects volume are public money coming into commodities and investing a piece of the portfolio. Hedge funds, index funds, that seems to be the real driver in volumes with the exchange.”
Randles said the new Yorkton plant has food safety standards to minimize the formation of salmonella, a bacteria that can cause food-borne illness.
Canola meal is not used as human food, but the U.S. Food and Drug Administration has a zero tolerance policy against meal with salmonella.
Several of Dreyfus’ rivals, such as Viterra Inc., Bunge Ltd. and Archer Daniels Midland, have plants that are under closer shipping scrutiny from the FDA because of salmonella-positive loads.
