Canola commission finds no net benefit to premium incentives

The Saskatchewan Canola Development Commission will not be pushing the industry to adopt component pricing.

It hired New West Partnership to conduct an economic analysis of whether it would be worthwhile to switch to a pricing system that would pay farmers a premium for growing canola with high oil content.

Canola is traded based on 42 percent oil content, which is what the crop used to produce. However, in recent years the national average has been higher than 44 percent.

Some growers feel grain companies and crushers are ripping them off, and SaskCanola decided to see if that was true. The report was completed and filed to the commission just before Christmas.

“In short, the evaluation told us there really is not going to be a net benefit to component pricing,” said outgoing SaskCanola chair Dale Leftwich.

“For every time you would have a premium you would have a discount.”

Grain companies and crushers price canola based on what competitors around the world are paying, what competing crops such as soybeans are paying and what the market will bear.

“They aren’t going to pay more for the product we produce than what they are currently paying,” Leftwich said in an interview following his presentation at SaskCanola’s annual general meeting at CropSphere.

In fact, there is a chance they would pay less because there would be additional costs for testing canola for oil content.

The analysis explored how Canadian canola prices stack up against international competitors and competing crops in Canada and how Saskatchewan’s prices compare to neighbouring provinces.

Leftwich asked if there were any farmers from Alberta and Manitoba in the room and jokingly asked them to cover their ears because it turns out Saskatchewan farmers are better paid than their counterparts.

He later said that’s because Saskatchewan produces so much top quality canola that it makes it easier for grain companies and crushers to source the crop.

“It helps them give perhaps a slight premium to Saskatchewan generally, but that’s earned by Saskatchewan farmers because of the amount of the stuff that we produce,” he said.

Saskatchewan farmers produced 8.8 million tonnes of the crop in 2015 compared to 5.4 million tonnes in Alberta and 2.9 million tonnes in Manitoba.

“It makes sense for companies to encourage production in Saskatchewan,” Leftwich said.

“We grow good canola and high oil canola, so there is a premium that seems to be afforded to that.”

Component pricing has been raised at the previous two annual general meetings. A farmer delegate criticized SaskCanola a year ago for dragging its feet on the issue and worrying more about the trade than the growers.

Leftwich said the commission is going to be very transparent with the report, pledging to post it on SaskCanola’s website in the next six to eight weeks and host webinars explaining the results.

“We want farmers to know what kind of numbers went into that report, so this will go up on our website in the next little while,” he said.

“We’re actually going to show the numbers so people can make up their own minds and look at all the data that has been presented and have a true understanding of how prices are set for their product in Saskatchewan.”

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