Canola is the perfect oilseed crop for biodiesel production.
But Canadian farmers aren’t likely to see much value in that because Canada doesn’t seem interested in biodiesel.
“In Canada, our government has been slack,” said Nolita Clyde of Ag Commodity Research.
“The most we’ll get is a secondary benefit from the United States market.”
Biodiesel production has become a big industry in Europe and is growing in the U.S.
Many analysts, including Clyde, think Europe will have to import canola this year to meet its needs for oilseed stocks. Because of the European Union’s tough regulations about genetically modified crops, any imported canola is likely to come from Australia, Clyde said.
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In the U.S., a number of state governments, including Minnesota, encourage biodiesel production and the federal government has provided temporary subsidies to kick-start a production industry.
Clyde thinks U.S. development is likely to increase because of the surge in energy prices, which has tended to make governments anxious.
“The latest scare in the oil markets may make them move sooner rather than later,” said Clyde.
In contrast, the Canadian government has done little to encourage biodiesel development, even though the government has embraced the Kyoto agreement’s goal of reducing pollution. Almost all biofuel development in Canada is based on ethanol production from feed grains, not diesel production from oilseeds.
Clyde said this should be annoying to the canola industry, because canola, with its higher oil-to-meal ratio, is a much better feedstock for biodiesel than soybeans, which fuel the U.S. industry.
With soybeans, Clyde said, “the first question is always: What do we do with all the meal left over?
“I say, perhaps we should use a more oil-oriented seed. That’s canola.”
Soybeans contain only about 20 percent oil, making the crop mostly a source of animal feed meal. But canola is about 42 percent oil, which leaves a much lower percentage of meal as a byproduct.
Government encouragement, whether through mandatory use or incentives, could have a large impact on the canola market, Clyde said. European canola prices are the strongest in the world right now, “and that’s because of biodiesel,” she said.
“It could do wonders for our oil market, but we need to get our government on side.”
Canadian canola farmers might get some benefit regardless of federal government policies. If biodiesel production in the U.S. and Europe swallows significant amounts of vegetable oils as already appears to be occurring in Europe, then canola prices might be carried along in a worldwide oilseed updraft, said Clyde.
