Canola industry officials are studying the idea of paying farmers based on the oil content of their canola seed.
They’re also considering setting new targets to increase the average oil content of the prairie canola crop over the next five years.
Both issues promise to be hot topics at the annual meeting of the Western Canada Canola/Rapeseed Recommending Committee in Saskatoon later this month.
The idea of establishing graduated payments based on oil content, similar to protein payments for wheat, has been around for years.
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But Dave Hickling, vice-president of the Canola Council of Canada, said it may now be getting closer to reality.
“The feasibility of a commercial payment system for oil is being seriously considered,” he said in an interview.
Some companies already offer identity preserved production contracts that pay premiums based on oil content, but some believe it would be a good idea to have a consistent industry-wide approach.
Such a payment system could be an incentive to producers to plant high oil varieties, which could encourage seed companies to develop more such varieties to meet market demand.
“Increasing oil content has been identified as the number one priority of the canola industry,” he said, a trend that could grow even stronger as demand for biofuel increases.
To that end, the committee is poised to adopt a plan to set a target of achieving a 1.2 percent increase in average oil content of new varieties over the next five years.
The proposal calls for an increase of 0.3 percentage points a year, relative to check varieties, beginning in 2008.
“The current thinking is this will probably go ahead,” said Hickling.
Farmers have mixed views on the idea of basing payments on oil content, according to Darin Egert, president of the Saskatchewan Canola Growers Association.
“What can end up happening is that instead of a bonus for higher oil content, there is a deduction for a lower content,” he said.
While the average oil content of the 2006 crop was 44.6 percent, for example, in any given year individual samples range from 35 to 50 percent.
Farmers who consistently get high oil will do well, but many farmers may face discounts for their seed.
It’s not clear at this point how the oil premiums might be reflected in futures prices or what level of oil content would represent the baseline above which bonuses might be paid.
“We definitely agree with wanting to increase oil content,” Egert said from his farm at Cando, Sask. “But as for the benefit for farmers, it’s definitely up in the air, depending on how companies base their prices.”
Other issues include the need for segregation at country elevators and the availability of testing technology at delivery locations. Both carry costs that Egert said could well be passed on to farmers.
“It’s OK only if it provides net benefits to farmers,” he said.
There is little farmers can do in terms of crop management or agronomic practices to influence oil content, which is primarily a function of weather.
Cool, moist conditions result in higher oil levels, while hot dry conditions mean lower oil content.
Egert said that means some farmers would face deductions for reasons beyond their control, although that’s also true when it comes to malting barley and protein levels in wheat.
If there were specific management practices that resulted in higher oil, he said, that would be an incentive to farmers to adopt those practices in order to capture oil premiums, but unfortunately that’s not the case.
One thing farmers can do is plant high-oil varieties.
Doug DeClercq, manager of oilseeds services for the Canadian Grain Commission, said one reason oil content in the 2006 crop was higher than expected, given the weather, may have been that farmers are planting more hybrids.
“They don’t seem to have a significant yield advantage but maybe they cope better with heat and drought stress,” he said.
DeClercq said he expects the
WCCRRC will adopt the targets of raising the content standards for new varieties.
“If we raise the bar on material entering the public co-op system, then maybe the commercial crop could creep up another one or two percentage points,” he said.
