They’re probably already painting new signs to post on the highway at the edge of town “Welcome to Yorkton, canola capital of the world.”
The east-central Saskatchewan city of 17,000 will soon be home to two big new oilseed crushing plants.
Last week, within hours of each other, JRI International and Louis Dreyfus Canada announced plans to build virtually identical canola crushing plants literally next door to each other.
Both companies expect to begin site preparation this fall and both expect to open for business in late 2008 or early 2009.
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The two plants, expected to cost around $100 million each to build, will each buy about 850,000 tonnes of canola a year, increasing Western Canada’s annual canola crushing capacity by about 40 percent, to nearly six million tonnes.
One industry official said the economic fundamentals of the canola industry are such that more expansion is inevitable.
“This is not over in any way, shape or form,” said Barb Isman, president of the Canola Council of Canada. “There will be more announcements coming.”
Oilseed crushing has become a highly profitable business, with demand from both the food and industrial biodiesel markets expected to grow in Europe and North America.
Last week’s double whammy announcement caught many industry officials off guard.
JRI announced in mid-July that it was planning to build a crushing facility and was studying several potential locations in Saskatchewan, Manitoba and North Dakota. So it was no surprise when the company called a news conference for Sept. 7 to announce its choice, and no big surprise when it chose Yorkton.
“Our decision was motivated by operational considerations first and foremost,” said JRI president Curt Vossen, citing the city’s location in the heart of a major canola growing region, access to two railways and major highways, excellent water, electrical and natural gas service and a reasonable urban centre to attract highly skilled workers.
He added there were no political considerations and special tax or other incentives from either the provincial or local governments.
“The true and total rationale was the natural advantages of the location,” he said.
The surprise to many was the announcement issued by Louis Dreyfus a few hours later that it, too, would build a plant in Yorkton, for the same reasons.
Dreyfus has been working without fanfare on its plans for five or six months, said company president Brant Randles, buying land, reaching agreements with local governments, lining up contractors and obtaining all the necessary environmental and other approvals.
“We’re a publicity-shy company,” he said. “We tend to keep quiet about things.”
He said Dreyfus knew JRI was looking at Yorkton as a potential location, but was surprised by the Sept. 7 announcement.
Jean-Marc Rouest, JRI’s assistant vice-president for legal and industry affairs, said his firm had “heard rumblings” that Dreyfus was considering building a plant in Yorkton, but said there was no direct communication about it between the two companies.
He suggested the Dreyfus announcement was triggered by JRI’s, although Randles said that was not the case.
Rouest also said he believes JRI is considerably ahead of Dreyfus in its preparations, which was also disputed by Randles.
Regardless of all that, both companies say they are committed to going ahead with construction and expressed confidence they will survive and prosper even in such a competitive situation.
The two plants together would require production from about two million acres of canola.
Industry officials estimate there are about 1.6 million acres of canola in Saskatchewan within an hour’s drive of Yorkton, along with another 800,000 or so in western Manitoba, for a total of 2.4 million acres.
Isman said it might have been problematic to have two plants open up next door to each other a few years ago, but the industry is changing.
With new technology leading to high yielding, high oil, agronomically sound varieties, and with prices likely to rise in response to strong world demand for biodiesel and quality food oil, acreage will increase and production will expand.
The industry has set a target of producing 14 million tonnes annually by 2015, about double the current level, and expects to regularly produce about 10 million tonnes over the next five or six years.
Production in 2006 was about 9.7 million tonnes.
“In the old world, maybe this didn’t make sense,” said Isman. “But given all the changes, this is plausible.”
