Canola oil is pouring out of Canada like someone punched a hole in the bucket.
That’s helping farmers pay bills and making the Canadian grain handling and crushing systems run fast.
“It’s fantastic,” said Greg Porozni, a farmer-director with the Alberta Canola Producers Commission.
“It’s astounding.”
Huge demand from China and continuing strong demand from other sources have driven canola prices high and convinced farmers to deliver their canola crops now, even though basis levels have worsened.
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With few other crops offering the same “cash in hand” opportunity of canola, farmers are continuing the practice of selling canola first.
“However you look at it, these are high prices today, regardless of the basis,” Porozni said.
Canola crushing is surging this crop year, rising to about 1.77 million tonnes by Nov. 17, compared to 1.13 million at the same time last crop year, according to the Canadian Oilseed Processors Association.
Seed exports are about flat with last year, with 2.1 million tonnes moving by Nov. 14 this year, compared to 2.25 million last year.
Looking at the calendar year, 3.5 million tonnes were crushed between January and August this year, compared to 2.8 million in the same period last year, according to COPA.
Part of the increase in crushing is credited to new and expanded plants coming online recently, but even with new capacity, COPA reports Canadian plants are running far closer to capacity this year than last year.
In the week ending Nov. 17, Canadian plants were working at 86.1 percent capacity, compared to 72.9 percent a year ago.
China has a growing demand for canola but it has restricted seed imports because of blackleg concerns. It is making up the shortfall by importing more oil and meal from canola crushers.
Porozni said the industry thinks China will buy 2.1 million tonnes of seed this year, plus one million tonnes of meal and 600,000 tonnes of oil.
“That’s 30 percent of our market,” said Porozni.
“Japan and China are almost half our market.”
With strong Asian demand and farmers pouring canola into the system, crushers have no reason to slow production. COPA’s Canadian Canola Board Margin Index shows the crush margin continuing to rise, reaching the two-year high zone. It is three times the margin crushers were receiving in the first half of 2009 and almost double the margin they got in mid-summer 2010.
Porozni said many farmers are annoyed that canola buyers seemed to respond to higher futures prices by widening their basis levels, but he thinks they were simply responding to a flood of canola attracted by the high futures prices.
“Farmers are responding to the signals, and so is the industry,” said Porozni.
The reason the industry widened the basis is that so much is coming in.”
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