Canada Markets

I remember just a few years when both Louis Dreyfus and Richardson had announced they intended to build a 2,500-metric-tonnes-per-day canola crushing plant in Yorkton, Sask. Those were big plants and there was a school of thought in the trade that this was a giant game of chicken and one of the two companies will blink and back down. It never happened. Both were built and in fact, the Richardson plant was only open for two years before a 25% expansion to the plant was announced.

Yesterday, Richardson announced it intended to double the capacity of its Lethbridge, Alta. plant. This is just one more announcement from a long string of announcements from various players to build, upgrade, and expand crush capacity on the Prairies, as well as increase refining capabilities. The latest announcement will double the current capacity of the Lethbridge plant from the current 410,000 mt to 820,000 mt annually.

Some of the other major projects announced include:

Fort Saskatchewan, Alta.: Bunge announced at least doubling capacity from the current 270,000 mt to 540,000 mt. No completion dates have been announced.

Camrose, Alta.: Cargill announced intentions to build an 850,000 mt plant, to be complete in the 2014/15 crop year.

Yorkton, Sask.: Richardson announced a 25% increase in capacity, from 850,000 mt to 1.063 million metric tonnes, to be completed late 2013.

Altona, Man.: Bunge is in the process of doubling its Altona plant from 425,000 mt to an annual capacity of 850,000 mt.

In addition to the expansion of crush capacity, Cargill announced construction of a refinery at its 1.5 mmt capacity plant at Clavet, Sask.. This is largest crush plant in Canada and billed as the largest "soft seed" plant in North America.

Current canola crushing capacity, suggested to be 8 mmt, is poised to grow by an additional 2.168 mmt of capacity should announced projects reach completion. While plants are classified on a metric tonnes per day crush capacity, the increased capacity would bring capacity to approximately 32,500 metric tonnes per day, requiring some 775 super-b loads daily to run at full capacity. (Note that these ratings are based on operation more than 340 days per year).

The move to a significantly higher crush as proposed may not be an easy one. While a move to increased value-added activity in Canada is a positive step, it may be difficult to convince the exporters. One major exporter already has ownership in partnership with the Chinese to crush at a Chinese port, where the country can build a plant cheaper and also operate it at a lower cost.

I came across a news flash from a social media site that China was increasing the number of plants crushing canola in its country, although haven't been able to verify that. Also, there's been recent expansion in U.S plants in North Dakota, Minnesota and Washington, all of which will rely on some quantity of Canadian production.

Then there's the supply of canola. The 21.531 million acres seeded in 2012 is more than double the 9.580 million acres grown just 10 years earlier in 2002. Seeded acres of canola have increased every year since 2006. The steady pace of growth in acres may take a break this year as projections have canola acres pegged as falling anywhere from 1% to 10%. A number of reasons are behind this, including issues surrounding rotations, disease build-up, canola's disappointing performance last season, canola's high cost of inputs and also wheat's performance and pricing opportunities relative to canola.

The situation really is a huge win for producers, with demand for product to come from all directions.

DTN 360 Poll

Your DTN Home Page now runs polls aimed specifically at Canadian producers and is found near the lower, right hand corner of the page. The first and current poll is focused on seeding intentions for wheat and is due to be changed soon. Please take the time to "click" your thoughts on this issue and then watch as the questions are changed periodically and the results are reported.

Cliff Jamieson can be reached at cliff.jamieson@telventdtn.com

(AG)

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