Canola growers will have three new delivery options in the crop year that begins Aug. 1.
Cargill Limited, Louis Dreyfus Canada Ltd. and James Richardson International are adding 2.5 million tonnes of annual capacity to a Canadian crushing industry that is expected to process 4.5 million tonnes of canola in 2008-09.
All three projects have suffered delays but the companies have confirmed their new facilities will be operational some time before the end of the 2009-10 crop year.
Cargill’s plant in Clavet, Sask., opened May 28, about seven months after the original target date.
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Robert Meijer, director of public affairs with Cargill, said construction went smoothly but they left it in “practice mode” a while longer than expected to make sure everything was working perfectly.
“When you build a house, the same thing happens, you always seem to see problems pop up,” he said.
The facility is operating at about 85 percent capacity. Once at full capacity, which should happen in the next few weeks, it will double the output of the Clavet operation to about 1.65 million tonnes of canola oil per year.
Louis Dreyfus Canada Ltd. had originally hoped to have its 850,000 tonne facility in Yorkton, Sask., operational by the last quarter of 2008.
Last year, when it became apparent that it would miss that deadline, the company set a new target of the second quarter of 2009. That date has been moved back once again.
“We are targeting an opening in October or November, so it’s the last quarter of 2009,” said Louis Dreyfus president Brant Randles.
The project has experienced engineering delays related to the plant’s control systems. The facility should be commissioned in September, which means all the components will be tested to ensure they are operating properly.
“We anticipate to be ready to receive new crop canola in September. The front end will be all ready,” said Randles.
James Richardson International had also targeted the end of 2008 for the opening of its 840,000 tonne plant in Yorkton but escalating construction costs forced the company to re-evaluate its plans. The board of directors decided to proceed but pushed the opening date into 2010.
“We’re still on pace to have everything up and running by the second quarter of 2010,” said Jean-Marc Ruest, vice-president of corporate affairs with the company.
Seed and meal storage has been erected, most of the major equipment has been delivered and installed in key buildings, the water storage tank has been completed and oil storage tanks are being finished.
“Now it’s a question of actually doing the installations and cladding and building around the manufacturing equipment,” said Ruest.
Grain industry officials have questioned how the Canadian canola industry can support three massive new plants. Those concerns persist.
Larry Weber, analyst with Weber Commodities Ltd., expects 9.2 million tonnes of canola production in 2009-10, a 27 percent decline from the 2008-09 harvest due to poor spring weather conditions.
“There’s not going to be enough seed for all that new capacity next year. You’re starting to see it in basis fights for new crop already. We’ve had some zero basis levels for new crop, which is unheard of for November delivery,” he said.
Weber said if he were running a grain company, he wouldn’t be in any rush to bring on new crushing capacity with a small crop on the horizon.
But the companies involved don’t share those supply concerns. Randles expects about 10.1 million tonnes of canola production and ample local supplies of the crop.
“The area in and around Yorkton and east of Yorkton is not as stressed as the Alberta crop in central Alberta, so I think there is going to be abundant supply for the plant,” he said.
Meijer expects a reliable supply of product for Cargill’s new plant, which will be devoted to processing high oleic canola. The company has contracts in place with buyers and growers to meet the burgeoning demand for the healthy oil.
“We’re in a pretty good spot in terms of how we partnered with growers,” he said.
