OTTAWA – A boom in Latin American soy production and increased concentration in the oilseed crushing sector threaten growth in the Canadian canola industry, says a Rabobank International official.
Canada and Australia are the major exporters of canola. But oilseed and vegetable oil buyers increasingly want to source from a wide variety of regions to cut costs and risks, said Alejandro Reca, executive director of food and agribusiness research for Rabobank International.
“Geographic diversification does not favour Canada and does not favour canola,” Reca told a conference of the Canola Council of Canada.
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Two years of drought in Canada and Australia have severely reduced world canola supplies and sharply increased prices.
“Canada is facing a tougher environment in the marketplace,” he said.
Five years ago, soybeans were primarily crushed for their meal, which is fed to livestock, while canola was seen as a superior quality oil. But soybean producers have increased research to improve the quality of their oil, Reca said.
“So you have a product, soyoil, that is increasingly being used as a source of profit for the industry,” Reca said.
Multinationals Archer Daniels Midland Co., Bunge Ltd. and Cargill Inc. are playing a more dominant role in world vegetable oil markets, together controlling more than 45 percent of world oilseed crushing capacity, Reca said.
In Brazil and Argentina, the three companies control more than half the soybean crushing capacity, and they are moving into Chinese crushing ventures, he said. The companies also dominate the Canadian canola crushing industry.
Soybean production costs in Brazil and Argentina are 25-37 percent less than in the United States, Reca added.
This year, total production from Latin America will exceed the U.S. for the first time.
Expanding canola production to new regions such as Argentina would help the crop’s fortunes in world markets, Reca said, given buyers’ desires to diversify oilseed sourcing.
