It’s been a bad winter for Canadian oilseed crushers and they’re
watching farmers closely to see if they’ll have more work and better
luck next year.
“Unless we get some indication of increased planting, there’s going to
be a lot of worry,” said Robert Broeska, executive director of the
Canadian Oilseed Processors Association.
Crushers are struggling just to keep their plants open. Low canola
prices kept acreage relatively small last year, and then drought
hammered yields down, producing a crop far short of spring expectations.
Read Also
Huge Black Sea flax crop to provide stiff competition
Russia and Kazakhstan harvested huge flax crops and will be providing stiff competition in China and the EU.
Broeska said much of the industry is working at only 50 percent of
capacity.
Woody Galloway, the head of canola procurement for CanAmera Foods, said
farmers still have canola to sell, but many are hoping for higher
prices. That might be a long wait.
“The growers are holding out for a big flat price, but the prices just
aren’t there in Chicago.”
Galloway said CanAmera is operating at 60 to 70 percent of capacity.
Canola trades off of soybean prices. Right now, prices are lower than
many farmers hoped for, but canola is selling at an enormous premium to
soybeans, so farmers should temper their ideas of what they can squeeze
out of the market.
Galloway said some poorer offshore demand is looking for cheaper oil.
“If the market’s supposed to ration demand, that’s what it’s done,”
Galloway said.
Trade estimates of the canola carryout have been expanding, so the
price does seem to be pushing away buyers, he said.
Crushers have not been doing well in recent years. Capacity is bigger
than the amount of canola for sale domestically. That leaves crushers
idling their plants and running inefficiently, which damages their
profitability.
Broeska said much of the present capacity was built in the hopes of
exporting oil as well as seed, but that hasn’t been achieved.
Japan and China are still buying seed for their own crushers and
keeping out Canadian oil. The Mexican market is slowly opening up as
trade barriers are reduced, but the barriers have helped Mexican
crushers prepare a defence against Canadian oil.
“It gave them time to upgrade their own crushing industry,” Broeska
said.
“Japan has long since figured out the secret to that formula. China’s
following Japan’s lead.”
Broeska said the federal government says it wants markets opened to
Canadian canola oil exports, but hasn’t worked hard enough to get it
done.
“They’re not being hard-nosed enough,” he said.
“I think the industry is really thinking about Canada’s commitment to
crushing canola.”
There’s still lots of potential for a Canadian crushing industry.
If China opened its market to oil imports, Canada could gain access to
a large population with an increasing appetite for oil.
India has failed to become self-sufficient in vegetable oil and may
begin to ease import oil restrictions.
And Japan is restructuring its crushing industry, which may open the
door to increased oil imports, Broeska said.
But crushers are worried about having to face another year in which
there’s too small a crop to keep busy, and not enough customers.
“It’s getting to be a very difficult scenario for this industry to stay
invested and stay optimistic,” Broeska said.
“Whether you’re invested in a farm or a processing plant or an
exporter, you like to see the value of that investment return profits
that show you’re competitive.”
