Less than five years ago Canadian crushers were losing money on every tonne of canola they crushed.
It was a brutalizing experience and followed two years of drought and a year in which frost devastated canola quality, leaving crushing companies wondering whether it was worth investing in the western Canadian canola industry.
Now those dark clouds have lifted and money is flowing back into the sector with James Richardson International’s announcement of a $100 million-plus crusher to be built somewhere on the Prairies. More announcements from other companies are anticipated.
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Crushers are optimistic about the future and willing to lay down their money again, said Canbra Foods chief executive officer Pat Van Osch.
“We know we’re in an industry where you’re going to go through these cycles,” said Van Osch.
“You should expect some drought and dry years every 10 years or so.”
The relaxed attitude of Van Osch is a result of both the Prairies’ ability to produce much more canola and of the North American consumer marketplace to absorb it.
“I think the market’s going to show and has shown that it will take more canola oil,” said Van Osch, whose company is owned by JRI. He doubts that big new crushers like JRI’s will flood the market with canola oil and lower prices.
“The reality is that if we had more crush capacity there would be less of that oversupply,” which is depressing today’s prices, said Van Osch.
“The industry has had enough crush capacity for 21/2 or three years now and is trying to squeeze out as much oil as possible to meet the demands of our customers.”
Canola is quickly moving away from being a cheap bulk oil to being a premium food oil and the preferred feedstock for biodiesel production. That should move it into the premium category and help farmers.
“You will see some improved values in the canola seed itself,” said Van Osch.
“I think the whole complex will improve over time.”
The pessimism of a few years ago now seems mostly forgotten, as the Prairies appear to be able to produce an eight, nine or 10 million tonne crop without much difficulty.
Only a couple of years ago the Canola Council of Canada set what it considered a lofty goal of “seven by seven,” or seven million tonnes per year by 2007.
That goal has been exceeded and few think canola will often drop back to the drought depths except in the most extreme circumstances.
But Van Osch admitted that canola oil buyers, such as major food processors who aren’t as closely tied to the farm, will need time before they accept they can be guaranteed adequate oil supplies every year.
“Our customers get frustrated with the cycles of canola oil and canola oil values,” said Van Osch.
“It’s important for us to find a way to have a stable supply, year over year.”
