Canadian canola processors have been crushing their way toward a record this year.
With more crushing capabilities and strong demand and returns for canola oil, crushers have processed 2.6 million tonnes of canola this year.
They’ve maintained a furious pace. A month ago, they crushed more than 76,000 tonnes of canola in one week.
But two weeks ago, crushers showed signs of slowing, handling only 46,600 tonnes of seed, down from more than 63,000 the previous week. Last week, the crush rebounded to 60,705 tonnes.
Nolita Clyde, who watches international canola markets for Statcom Ltd., said the pace dropped in early May because one crusher shut down for annual maintenance, another reduced its pace, and a third temporarily switched to linola.
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But she says she’d be surprised to see the pace taper off from this point.
“It just doesn’t seem to make sense, given the strong oil demand that’s out there,” said Clyde.
Canbra Foods Ltd. in Lethbridge, Alta., has stopped crushing to do some maintenance, explained president and chief executive office Larry McNamara.
It is also adding some refining equipment to match its expansion in crushing capacity.
During the past two years, the plant has gone from being able to crush 750 tonnes per day to a capacity of 1,200 tonnes per day, said McNamara.
As for price, traders at the Winnipeg Commodity Exchange have focused mainly on weather lately, but the slower crushing pace has had an impact.
“I don’t think it can be discounted,” said Tony Tryhuk, a trader with Pool Commodity Trading Services.
“The lack of availability of seed and annual maintenance schedules are certainly having an influence, there’s no question about that,” he said.
Crushers haven’t been putting on fresh business for old-crop canola in the futures market, said Tryhuk.
But they haven’t backed away from the market entirely, either.
Low margins
Margins, or profitability, for crushers haven’t been great, Tryhuk noted.
McNamara agreed.
“To some degree, it (poor margins) might suggest we might stay down longer than typically because they’re so unfavorable, so there’s no hurry to come back up,” he said.
Canola seed prices have been high relative to the values for canola oil and meal, he explained.
“What’s holding the seed prices up is the uncertainty of old-crop seed supplies until we get our new crop in August,” he said.
Margins for the new crop are also disappointing, although they look somewhat better, he said.
Clyde forecasts a record total crush this year of 3.2 million. Crushers would have to crush an average of 52,500 tonnes a week for the rest of the crop year to reach the target.
“A lot of the seed has already been sourced for that crush,” said Clyde.
“The question comes when people talk about a crush bigger than that (3.2 million tonnes),” she said.
“It’s getting pretty tight out there.”
Clyde noted some companies have made arrangements to get canola from the United States and Europe to tide them over until new crop comes off the combine.
Some farmers in southern Alberta have also planted early maturing Polish varieties in hopes of an early harvest to capture higher prices for old-crop canola, she said.
