Canola has huge market potential, Canadian Cargill president Kerry Hawkins told the Manitoba Canola Growers Association during Manitoba Ag Days.
But the Canadian industry also faces a big threat to its market share, he said.
Getting reliable production and supply is going to be key to grabbing that potential.
“Our success has bred a lot of competition,” Hawkins said.
“We can’t sit back any more and assume customer loyalty (to Canada) is going to ensure us that market share we’ve had in the past. If customers can’t get their canola seed or oil from us, they’re going to go somewhere else.”
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Hawkins said droughts in 2001 and 2002 shook up foreign buyers, such as the Japanese, and they may not want to depend on prairie canola if it keeps disappointing them. They will be forced to act if they experience a third shortfall.
“What they’ll do is they’ll quit buying 80 percent of their canola from Canada and 20 percent from Australia, and basically just shift their risk, and buy 60 percent from Canada and 40 percent from Australia.”
Hawkins said canola oil has health advantages and is growing in popularity with American consumers and processors, but they will not stand by the Canadian industry if it can’t supply their needs. Other growing regions have shown they want to get into the business.
A few years ago American farmers produced only 200,000 acres of canola, but this year they will probably top two million acres, said Hawkins.
He said the potential for the canola market is “tremendous.” Many major fast food companies, such as McDonald’s, Wendy’s and Kentucky Fried Chicken, are demanding healthier edible oils and canola is ideal.
Not only is it the healthiest major oil on the market, but it can more easily be developed into customized oils. Palm and coconut oils, which are used by many restaurants, can’t easily be adapted to health concerns.
“Nothing they can do. They won’t even be in this game,” said Hawkins.
But the major processors and restaurant chains will not adopt canola oil if supply is in doubt, Hawkins said. They want guaranteed supply or none at all.
There is core demand for about eight million acres of canola from the Prairies, and more can easily be sold into the bulk commodity market. But new buyers will be scared of incorporating canola until its acreage here is bigger and more dependable.
“We have to get a mature industry in Western Canada for canola production that virtually guarantees that farmers will at least plant a minimum of 12-13 million acres a year.”
Hawkins hopes a new, long-term contract system will keep farmers growing canola consistently, not jumping in and out of the market based on guesses about where prices are going to go.
