To some, it looks like James Richardson International and Louis Dreyfus Canada are speeding toward each other in a game of corporate chicken.
Each company insists it is charging forward with its own canola crushing plant in Yorkton, Sask., even though there isn’t enough canola in the area now to fill both plants’ needs.
“We’re still going ahead,” said Jean-Marc Ruest, the assistant vice-president of legal and industry affairs for JRI.
“We said before that the existence of other competitors is something we can’t control and had modelled our plans for that possibility. So we are going ahead.”
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Louis Dreyfus Canada president Brant Randles believes his company has the best site in Yorkton for a crush plant and is further ahead with its plans than JRI.
Dreyfus already has a water management and effluent treatment agreement with the city government, has completed its environmental assessment and received environmental approval and is in the middle of tendering the construction contract for the 230 acre site that it bought this year.
But he clearly does not relish the idea of having to fight for canola with a JRI plant just down the block.
“One plant alone will require 1.3 million acres (of production). That’s 20 percent of Saskatchewan’s recent area for canola. That would be almost half the crop (if both plants are built), which in one area is a lot of pressure,” said Randles, explaining why there are rumours one plant may back out.
“I think that’s what people are looking at. It would definitely drive procurement expenses over budget, let’s say. You’d see a lot of upward pressure on the basis as we try to buy more acres or go further afield to bring the canola in.”
Ruest said JRI hopes the region around Yorkton can produce all the canola the two plants will need. But it will use its Pioneer elevator system to source the canola if it needs to.
“We’ll do what needs to be done to operate the plant,” he said.
Randles said a Yorkton crush plant fits perfectly with Louis Dreyfus’ international crushing network, which includes soybean plants in Argentina, Brazil and a soon-to-be-finished plant in Indiana.
“I think it’s a great move for the company, in terms of diversifying geographically and from a product mix point of view,” said Randles.
Farmers, especially in the Yorkton area, won’t suffer if both plants are built and start competing for canola supplies. But the overall canola industry won’t do well if crushers are pushed into unprofitability by overcapacity, a problem that has often plagued the industry.
Canola Council of Canada president Barb Isman said it’s up to her organization and its members to make sure both farmers and crushers make money.
Farmers need higher prices for their canola; crushers need lots of canola to crush.
“There’s a challenge,” acknowledged Isman.
“Is it different? Yes. Is it a challenge? Yes. Is it unmanageable (to provide enough canola for the two proposed Yorkton plants)? Not if you have the price signals and the agronomic tools.”
Farmers will plant more acres of canola if it makes them more money than growing other commodities, she said. To boost prices, the industry needs to keep winning victories like the qualified health claim in the United States and needs to develop a canola-consuming biodiesel industry.
Boosting yields and hardiness will produce more canola for the crushers and make farmers more money.
“We’re talking about rotations and improved stress tolerance and higher yields and optimum use of inputs and all kinds of things to change our paradigm for production,” said Isman. “The combination of price stimulus and having the tools to respond to that price stimulus should make it possible to produce the product.”
