A golden future? Trade deal could see more canola crushing here

Canola producers who farm close to crush plants can get premiums, 
but it can mean more trucking costs

Canadian canola producers are poised to crush the Asian canola oil market if the Trans-Pacific Partnership trade deal is implemented.

“The immediate benefit in the next five years is going to be that the tariffs on canola oil going into Japan are going to drop from 15 per cent to zero,” said Ward Toma, general manager of Alberta Canola Producers Commission.

“That means more oil is going to be moving into that market, so that’s more value-added exports from us.”

He pointed to Japan, which imports about 2.4 million tonnes of Canadian canola seed every year and used tariffs on imported canola oil to bolster its own crushing industry.

“They had a high tariff on oil and a low tariff on seed,” said Toma. “They were making imported oil more expensive in Japan to protect their canola-crushing industry. They could buy seed in world markets, but they didn’t have to compete against oil that was coming from Canada.

“It gave them a bit of a benefit.”

By agreeing to the trade deal, Japan would give oil exporters “a more even playing field.”

“They’re saying, ‘Our crushers now have to be competitive and they have to compete against internationally produced canola oils.’”

More crush coming?

Increased oil exports could mean more crushing plants here in Alberta.

“The crushing industry in Japan needs some reinvestment in some of its plants,” said Toma.

“But it might be cheaper for them in the end to access oil from Canada rather than rebuild crushing facilities or build new facilities in Japan. That allows more crushing here.”

Crushing capacity has almost doubled in Western Canada since 2010, but even with four crush plants — in Lloydminster, Fort Saskatchewan, Lethbridge, and Camrose — Alberta is only able to crush around 30 per cent of its production.

Saskatchewan, which also has four crush plants, processes about half of its production while Manitoba crushes a hefty 75 per cent of its production in its three plants.

As well, demand for canola oil worldwide is growing. Canadian canola oil exports have more than doubled over the last decade, with the U.S. and China the main buyers.

“Some of the projections around the demand growth for canola oil in Asian countries and around the world are still quite positive. People are still asking for it,” said Toma.

And Alberta is well positioned to meet that growing demand.

“Canola oil that’s shipped to Japan is loaded in vessels at the Port of Vancouver, so in Alberta, we are by virtue of geography closer than Saskatchewan or Manitoba,” he said. “If our production continues to grow over the next 10 to 20 years, we may see more crushing coming in. It depends on the profitability in the long run.”

More money for growers?

Crushing offers “another delivery point and another buyer” for canola producers, said Toma.

How that plays out for the bottom line depends on how close the crushing plant is to the farm.

Lee Markert

Lee Markert
photo: MAFRD

“Having crushers in Western Canada is invaluable, but whether I deliver to one personally just depends on what kind of basis and what kind of deal I can get and whether or not it fits into my logistical plan,” said Lee Markert, who grows canola on his farm near Vulcan and is chair of Alberta Canola Producers.

“If I can make more money hauling to a crusher, I will. But if I can make more hauling locally, I will. It all comes down to dollars and cents at a local level.”

Up until a few years ago, Markert sold almost exclusively to a crusher because of the premium he got from it.

“My experience with a crusher was generally favourable from a price perspective, because we’re located close to one in Lethbridge,” he said. “Generally, the premiums you can garner by selling directly to a processor are better than those of selling to a terminal.

“Instead of paying a grain company to do those logistics for you, you’re paying yourself to do it. You realize more the actual price of the grain because you’re that much closer to the end-user as opposed to going through a broker or grain terminal.”

Still, Markert has cut crushing from his marketing plan.

“The way we structured our marketing, we delivered a lot of our canola in the summer, so we weren’t busy seeding or combining or fighting with snow. We had the time to do it in the summer,” he said.

“As time went on, we felt like we could capture better value by delivering at different points in the year and not marketing it all in one specific time frame.”

Time was another factor for Markert.

“We decided it was in our better interest to haul it to a terminal locally and be done with it because we could get more done in a shorter period of time,” he said.

“We were hauling 125 kilometres as opposed to 25 kilometres, so it took more time and it was more labour intensive. I might garner a higher price, but the increased value I might gain isn’t captured in my costs to get it there.

“We’re not in the trucking business. We’re in the grain-producing business.”

Even so, that could change if the price was right.

“Sometimes it might make sense, but sometimes it doesn’t,” he said. “But for those located closer to a processor, it does present a lot of opportunities.”

About the author

Reporter

Jennifer Blair

Jennifer Blair is a Red Deer-based reporter with a post-secondary education in professional writing and nearly 10 years of experience in corporate communications, policy development, and journalism. She's spent half of her career telling stories about an industry she loves for an audience she admires--the farmers who work every day to build a better agriculture industry in Alberta.

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