Conventional wisdom would suggest the one agricultural commodity that could be most impacted by COVID-19 is high oleic canola oil.
The product made its name in the food sector as a replacement for partially hydrogenated soybean oil in restaurant fryers.
The foodservice industry has been decimated by COVID-19. Statistics Canada reports that two-thirds of Canada’s restaurant workforce are out of work.
There are a lot fewer people munching on french fries these days. So wouldn’t that result in vastly reduced demand for high oleic canola oil?
The answer is yes and no, said Tyler Groeneveld, Corteva Agriscience’s commercial grains and oils leader for North America.
“You are seeing less frying oil used and it’s very significant obviously, as only pick-up or drive-through alternatives are available for people right now,” he said.
However, the idea that high oleic canola oil is only sold to the foodservice sector is an outdated notion.
“In the last years we diversified quite a bit into the food-processing segment,” said Groeneveld.
It takes much longer for food processors to make ingredient changes but they are now using high oleic canola oil to make products like cereals, snack foods and cookies and that represents a huge new source of demand for the product.
“Just about everything is made with vegetable oil,” he said.
In fact, he estimates there is a pretty even split between restaurant and food processing demand these days. At least there was before COVID-19.
While restaurant demand for the product has cratered, food processing demand has exploded as desperate consumers have been stocking their cupboards with grocery store products containing high oleic canola oil.
Corteva’s processing customers have already contracted Nexera canola acres with growers. That process started last fall, prior to COVID-19.
“Our contracting acres will be up significantly over 2019,” Groeneveld said.
Doyle Wiebe, a farmer from Langham, Sask., is relieved that the market for high oleic canola oil appears robust.
“I’m happy to hear that there may be reasonable stability in total demand and that we can continue on the program we’ve been on,” he said.
Wiebe has been growing high oleic canola for Cargill, the other main player in the industry, for more than a decade. Cargill was contacted for this story but did not respond.
He intends to keep his canola acres flat in 2020, including the 60 percent seeded to high oleic varieties.
Cargill’s crush facility in nearby Clavet, Sask., has a line dedicated to processing high oleic varieties.
“I’ve heard no word that they’re slowing that production line down,” he said.
Wiebe said Cargill’s main customer is McDonald’s. He doesn’t know how diversified the company is in the food processing side of the business.
Planning high oleic acres is a long-term business due to the nature of the contracts. He has high oleic canola in his bin for delivery in June, July and August that was contracted 20 months ago.
Groeneveld said North American supplies of high stability oils such as sunflower, safflower and high oleic soybean and canola oil were extremely tight last year.
He estimates Nexera canola acres will be up more than 10 percent as processors attempt to ease that supply crunch.
“We feel, at this point in time, fairly bullish on the market opportunities for high oleic,” he said.
The shift in demand from the restaurant business to the food-processing sector does not change the crushing process, other than restaurants tend to purchase the oil in 35-pound jugs while food processors take trucks or rail cars.
“It’s a different delivery system but it’s the identical oil,” he said.
Groeneveld estimates that about 10 percent of Canada’s canola production is used to make high stability oils.
Canadian growers planted about 21 million acres of canola in 2019. He expects acres of most major grains and oilseeds to remain flat despite the global pandemic.
“At this time I wouldn’t forecast significant changes,” he said.
“Our perspective right now is it’s business as usual.”