Canola farmers near Portage la Prairie, Man., have shelved a plan to build a biodiesel plant.
Fifty growers contributed to a feasibility study that concluded it is not a profitable venture in today’s environment of high canola prices.
“It didn’t matter what economies of scale we tried to do, it just didn’t make sense,” said project spokesperson Chris McCallister.
“Everything was showing negative returns.”
The group explored options that ranged from a farm-scale plant to a multimillion litre plant that would export product to the United States.
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“What we came back with is nothing made sense.”
McCallister said rising feedstock costs are the main culprit. When the farmers started exploring the idea of building a biodiesel plant, canola was selling for $6 per bushel. By the time they conducted the feasibility study, prices had more than doubled.
The group had also hoped to source cheap fry oil from nearby French fry plants operated by J.R. Simplot Co. and McCain Foods Ltd. However, they discovered that waste oil was not cheap and had already been spoken for by other buyers.
Canola Council of Canada president JoAnne Buth said the Portage la Prairie group has company.
Biodiesel projects face a variety of roadblocks, such as rising feedstock costs, a lack of confidence in equity markets, tighter debt financing and a federal mandate that is still four years away.
“We still believe that it’s a very important component of the canola industry, but it has been slowed,” she said.
As far as she knows, none of the large projects that were announced around the time Ottawa committed to a minimum two percent biodiesel mandate have progressed.
“I think it’s just going to take some time,” Buth said.
Things could be worse. She said the United States and the European Union have dramatically overbuilt their biodiesel sectors. In 2007, the U.S. industry operated at 18 percent of capacity.
Buth is confident plants will be operating in Canada in time to meet the 2012 mandate. If the entire mandate was filled with canola biodiesel, 1.3 million tonnes of the oilseed would be required.
“The reason we’ve been so supportive of biodiesel is because it provides another market, especially if it’s a mandated inelastic market,” she said.
The council wants to see 2.5 million tonnes of canola processed for biodiesel by 2015, an ambitious objective considering only two small plants now process less than 0.5 million tonnes of canola into biodiesel in Western Canada.
McCallister said the Portage la Prairie plant could contribute to that goal if industry economics change.
“Maybe in a few years when fuel prices go up and canola prices go down, maybe we can start to see a buck again.”
