It’s hoped China and U.S. dairy farms will take most of the meal produced by new proposed crushing plants
Western Canada will be awash in canola meal once all the new canola crush facilities are built, says an analyst.
Canola crush capacity is expected to grow by 5.7 million tonnes over the next few years, a 50 percent increase over today’s levels, according to the Canadian Oilseed Processors Association.
“Truth be told, most of those plants, or all of those plants, that have been announced will get built, because there are some deep pockets behind them,” said Chuck Penner, analyst with LeftField Commodity Research.
That is going to result in an additional 3.5 to four million tonnes of annual canola meal production.
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“The massive question is, where is all this meal going to go?” Penner said during a recent market outlook presentation at the annual general meetings of Saskatchewan’s crop organizations.
The answer is mainly China, said Brittany Wood, director of canola utilization with the Canola Council of Canada.
The United States is the top buyer of Canadian canola meal, accounting for 3.4 million tonnes of the 5.7 million tonnes sold in 2021.
But that market is soon going to be “up to its armpits” in soybean meal, said Penner. U.S. soybean crush is expected to grow by 15 million tonnes over the next few years, resulting in an additional 12 million tonnes of soybean meal in that market.
“Growing domestic use of canola meal in the United States is going to be hard with all that soybean meal available,” said Wood.
Instead, the council is focused on maintaining current sales to the vitally important California dairy market.
That will be a challenge considering soybean meal is set to become an even more cost-effective feed ingredient.
The council is going to continue to educate the dairy sector about how including canola meal in rations increases milk production and decreases methane emissions.
China bought 1.6 million tonnes of Canadian canola meal in 2021. It is mainly used in the country’s aquaculture sector, which is poised for tremendous growth.
The country’s dairy industry also has a good growth trajectory. LMC International is forecasting 16 million dairy cows in China by 2035, up from about 14 million today.
The same company is forecasting that China will be importing nearly 3.5 million tonnes of Canadian canola meal by 2035, more than double today’s levels.
Canada is the third largest market for Canadian canola meal, consuming about 556,000 tonnes in 2021. Wood said there is still room for growth in Eastern Canada’s dairy sector.
Sales to all other markets are negligible. But there is potential to replace rapeseed meal in Vietnam and Thailand, which each consume 150,000 to 300,000 tonnes of rapeseed/canola meal annually.
Wood said she doesn’t envision a glut of canola meal weighing down markets.
“A lot of it will move offshore,” she said.
“I think demand will definitely be there.”
LMC expects world oilseed meal consumption will rise by 106 million tonnes by 2035 due to continued growth in global meat and dairy consumption.
However, Penner can’t shake the notion that meal prices are heading lower as an additional 12 million tonnes of soybean meal and 3.5 to four million tonnes of canola meal suddenly appears in North America.
“The meal side of that value equation is going to barf, while the oil side is going to be strong,” he said.
