Canada’s canola crushers have come through a busy winter and hope it continues.
They don’t want to slip back into the lazy days of the drought years.
“It’s a very welcome change to have tonnage to put through,” said Robert Broeska, executive director of the Canadian Oilseed Processors Association.
“Everyone’s guardedly optimistic.”
In 2001 and 2002, the small crops produced by the droughts in Alberta and Saskatchewan left Canadian canola crushers and exporters fighting over the crop.
Crushers often shut down for extended periods or ran at half capacity as supplies ran out.
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But last summer’s average-sized crop gave them enough supply to keep busy through the winter. A number of times, weekly crushing rates hit records.
From January to the first week of April, crushers had processed almost 2.3 million tonnes of canola, compared to about 1.5 million in the same period last year.
Crushers are now running at almost 90 percent capacity.
Crushers have been aggressive in the canola market, sucking in supplies to lock in profits. Unlike a year ago, when crushers were losing up to $80 for every tonne of canola they crushed, they are now making close to $100.
That sounds like a huge profit, but market analyst Brenda Tjaden Lepp said it’s a reasonable return given the industry’s large losses in 2002 and 2003.
“Any business that relies on weather and cyclical price cycles needs to make the most out of those rare years when prices are good,” she said.
“I hope farmers are doing that for themselves.”
Nolita Clyde of Ag Commodity Research said crushers have recently narrowed their basis levels in order to keep drawing canola from farmers.
“Margins may not be as good as they were at one point, but there are still some pretty good canola crushing margins,” she said.
China has been a key player in making canola crushing profitable this year, Clyde said. It has imported a lot of soybeans to produce meal, but that left it short of vegetable oil. Some of the gap was filled with canola oil from Canadian crushers.
Broeska said crushers are still worried about drought.
“Last year there was a crop just by virtue of some very timely precipitation,” he said.
“I don’t think the rain we got last year was enough to replace the subsoil moisture we lost (during the drought years).”
Good rains are needed this spring to reassure growers and crushers that the drought is gone, said Broeska.
