Canada’s canola crushers are cruising through a much better year than they are used to.
They have a big, high quality crop and that is producing profits and lots of work.
“They’re busy,” said Robert Broeska, president of the Canadian Oilseed Processors Association.
By Dec. 28, Canada’s crushers had processed almost 1.359 million tonnes of canola, up almost five percent over the 1.298 million at the same time the year before.
Crushers have been running at an average of 87.8 percent of capacity.
The Canadian Canola Board Margin Index, which is a measure crush profitability, shows the business has become more attractive. At this time last year, crushing canola was a break-even or losing proposition. Earlier this decade when small crops were grown, the plants often lost money on every tonne they crushed.
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Last year, crushers had a big crop to use, but a widespread August frost destroyed its quality and value.
“Last year was a disaster for farmers and crushers alike,” said Broeska. “The season just produced a lot of poor quality canola.”
Frosted canola often contains high levels of chlorophyll, which gives the oil a green tinge. Most canola oil buyers don’t want green oil, so crushers and processors have to use solvents and other cleaners to remove the colour, which costs time and money.
Those costs are generally passed back to producers in the form of lower canola prices at the elevator.
With world markets glutted with vegetable oils, moving canola oil on the world market often meant selling at a low price last year.
This year crushing and refining the oil is easier because there is little green seed, but making sales is difficult because there is still a glut of vegetable oils.
“We’re facing larger volumes of oils coming from, especially, soybeans in Brazil. It’s created a fairly competitive situation in the offshore market,” Broeska said.
A positive recent development has been the huge upsurge in demand from the biodiesel industry in Europe, a demand that can’t be met with European production.
Some Canadian canola has been sold to European biodiesel makers, mostly off-grade canola unappealing for human consumption.
But the main beneficiaries of this new demand have been Malaysian palm oil producers who are selling to Europe.
“It’s a great alternative and is shifting the whole model in Western Europe for vegetable oils to one that’s based on…large imports of palm,” said Broeska.
“Several major palm oil refiners in Malaysia are building refining facilities in the main ports in Europe for imports of semi-refined palm oil for fuel and food.”
While high fuel prices have helped spur biodiesel demand, they also have increased crushers’ costs. Crushers use a lot of energy and the industry is grappling with what to do if fuel prices stay high.
“It looks like it is a longer term issue,” said Broeska. “It seems a fundamental shift in manufacturing power and manufacturing efficiency and competitiveness that Asia seems to be generating.”
