Why Omega-9 Oils?
Of the thousands of acres of Nexera canola grown every year across the Prairies, the vast majority is processed here in Canada and shipped as oil to the United States for use in restaurant frying and packaged goods.
Changes in the U.S. Food and Drug Administration’s (FDA) views on partially hydrogenated oils (PHOs) — which are considered the primary dietary source of artificial trans fats in processed foods — are driving demand for the Omega-9 Canola Oil. In June 2015 the FDA released its final determination that PHOs are not deemed “Generally Recognized as Safe” (GRAS).
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Partial hydrogenation is an industrial process to help stabilize oil. Trans fats are created during that process. The FDA has removed the GRAS status for products that contain trans fats, including partially hydrogenated soybean oil. This has opened the door for Nexera.
“Because of the fatty acid profile of Omega-9 Oils, it is naturally highly stable and doesn’t require any industrial processes to get it there. It comes out of the plant like that,” says Chris Nowlan, canola products market manager for Dow AgroSciences.
Primary uses for these oils are frying (particularly in quick-serve or fast-food restaurants) and in packaged goods such as potato chips, cookies and cakes. Historically one of the benefits of partially hydrogenated soy oil was that it was very stable and was the product many companies chose to provide a long shelf life. Omega-9 Canola Oil offers even more benefits.
“The reason Omega-9 Canola Oil is such a good fit for those segments is its stability, even more so than commodity canola oil. Its high levels of oleic acid and very low levels of linolenic acid give it a stability profile that means that in a fryer for instance, it withstands heat and commercial use better than a lot of conventional oils. In food products, the stability profile means improved shelf life for packaged goods,” Nowlan says.
Long lead times
Planning for the end-users of Omega-9 Oils starts between 18 and 24 months before the crop goes in the ground.
The packaged goods companies and processors agree on the amount of oil needed a year or even two years into the future. Processors can to do this because they have a good sense of what their premiums will be and their cost of production, so they can set a price that far in advance.
Nowlan works with all partners from end-use oil customers to processors. “We try to continually refine those numbers so we can understand where our oil customers are going and what that means for requirements for seeded acres in the next year or two.” This is why contracts with growers are so critical.
Contracts — not one size fits all
The first thing to be aware of is that there is a lot of variability in terms and conditions between contract partners. This is generally to the growers’ benefit as they can shop around and get the conditions that suit their operation best.
Typically growers would sign a contract for a targeted number of acres of production that they are obligated to deliver to a processor — sometimes at a fixed price, sometimes not. More specifically, depending on the contractor, growers may be offered flexibility in how and when the crop is priced, as well as delivery windows.
“Typically what is fixed is the premium set above the underlying price of the commodity — in this case canola — giving growers a clear picture of the minimum they can expect to earn. Generally my expectation is that growers should see premiums at or above $40 tonne on a Nexera Omega-9 Oils crop,” Nowlan says.
Step-by-step
There are two ways to grow Nexera: contract Nexera Canola hybrid acres through one of the five contract partners, or opt for a Flexibility Agreement, which allows you to grow and market a Nexera Canola hybrid without a contract.
The grower contracts to seed a specific number of acres and to deliver that crop to a specific processor within specific delivery windows. Once the grower has committed the acres, the contract is entered into the system, which allocates seed for delivery to the grower’s retail outlet.
Many contracts have an act of God clause that doesn’t hold producers accountable for weather or circumstances beyond their control. “We have had lots of instances where there was frost, or conditions were too wet or too dry. The grower is responsible for putting that crop in and producing it, but not necessarily for what that crop produces,” Nowlan says.
Each contract has a grade structure. Nowlan breaks it down this way.
“There are two ways to look at grade. First, you grade just as you would with commodity canola. But with Nexera the grower is responsible to ensure the quality of the Nexera they produce, that they are controlling volunteer canola in the field, for example and that it is segregated at harvest from other canola crops from that operation.” This is to ensure they get a full expression of the oil profile that has added value to the market.
Contract considerations
- What are the delivery options and windows available? Do they fit with the grower’s business requirements? “Yes, there are set delivery times, but you can select ones that suit your operation and will know them in advance. While it may be nice to make your own decisions on when to go to market, that can also leave you at the mercy of that market,” Nowlan says.
- Understanding their ability to segregate at harvest. The crop must be stored separately, so bin space can be an issue. “I have had guys say that they don’t think they can include Nexera because they don’t have the dedicated bin space because it is needed for their commodity canola. I say ‘why don’t you just grow all Nexera!’ And we have seen more farmers across the Prairies making that decision after they have tried Nexera for a few years.”
The Nexera growers today are the ones who understand and realize the value of the specialty crop and have discovered how to work around the perceived constraints and delivery windows.
The FDA’s three-year compliance period comes due June 2018, which requires food processors to meet the new regulations on trans fats. That means the demand for Omega-9 Oil is unlikely to decline anytime soon. This will mean a little less guilt when enjoying those potato chips or cookies.
This is the second part of a three-part sponsored content series about Nexera Omega-9 Canola. Click here for Part 1.
