The golden arches are putting a big, yellow smile on the face of the Canadian canola industry.
That’s because McDonald’s and other fast food restaurants have created such a demand for high oleic canola oil that canola crushers are expanding existing plants and building new ones.
“It’s really exciting news for the industry,” said Joanne Buth, president of the Canola Council of Canada.
“Demand is going to remain strong.”
A massive expansion of crusher capacity is occurring on the Prairies.
Cargill is the latest to join, announcing last week it will build a new plant beside its existing Clavet, Sask., operation. The project will double its crush capacity in the community east of Saskatoon to 1.5 million tonnes.
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The new project replaces a plan announced last year to increase capacity of the existing plant by 25 percent.
Louis Dreyfus is building a plant in Yorkton, Sask., and James Richardson International is still expected to build a new plant there, too.
These projects are on top of expansions and continued healthy production at the Archer Daniels Midland plant in Lloydminster, the Bunge plants in the three prairie provinces and the Canbra plant in Lethbridge. Canada’s canola crushing industry appears to be booming and farmers are happy to be dragged along with it.
“It all points to really continuing strong demand for canola,” said Buth, whose organization hopes Canada can produce 15 million tonnes of canola per year by 2015, as part of its “15 by 15” target.
The industry expansion is not just due to the general world boom in oilseed consumption, but also to canola-specific factors.
The anti-trans fat movement in the United States has led a string of fast food companies to abandon hydrogenated oils. Certain types of canola oil such as the high oleic work well in deep fryers without being hydrogenated, which is the process that produces trans fats that harm human heart health.
McDonald’s, Wendy’s, A & W, KFC and Taco Bell have all said they will stop frying with partially hydrogenated oils. Buth said the expansion in Clavet is connected to this phenomenon.
“Cargill is making the commitment to continue to supply (McDonald’s),” she said.
Canola has long had a good reputation as a healthy oil, but only with the anti-trans fat movement has it seen its demand balloon in size, allowing huge crops to be grown without damaging the price.
In the early years of this decade, two years of drought caused many canola crushers to run far below capacity and incur huge losses. Some crushers wondered whether there was any point investing in an industry that seemed to bring only losses and frustration.
But with Bunge, ADM, Cargill, Louis Dreyfus and probably JRI all pouring money into the sector, “things are pretty bright right now in the canola industry,” said Buth.
The big challenge now is to convince growers to grow more canola. To reach 15 by 15, canola returns will have to be high enough to beat competitors like wheat, Buth said.
