Regina is on its way to becoming the canola crush hub of the country.
The most recent canola crush announcement, made last week, includes a 1.1 million metric ton capacity plant, funded by AGT Foods and Federated Co-operatives Limited.
While announcements have been fast and furious the last few years, Chuck Penner of LeftField Commodities Research, says this is a movement that started decades ago.
“In the early 90s, there were announcements about crush plants increasing. I worked for UGG, which had a crush plant up in Lloydminster. And it was owned together with a Japanese firm. For whatever reason — I don’t recall all of it — they decided there was no money to be made in canola crushing. So UGG sold their share of that crush plant. So that’s the starting point,” Penner recalls.
During that time period, Penner recalls crush was under 2 million tonnes a year in Canada, while the last couple of years — even during a drought — the country has seen over 10 million tonnes of crush. But as he notes, there have been “waves or stages of that expansion.” (Story continues below interview)
“The total of those expansions is 6.8 million tonnes of canola. So if we go from 10 million to 17 million tonnes of canola crush, that’s a huge, huge jump. And so there are big implications if all of these get built now. And truth be told, these are all some pretty big heavyweights in the industry. So it’s not like it was when we were building (or talking about building) ethanol and biodiesel plants 10-15 years ago, where there was a flurry of announcements and you’d count maybe one out of five that might get built. There are some pretty serious contenders here in this and they don’t go into it lightly,” he says.
There’s plenty of speculation on where all of this canola is going to come from, and if there is going to be a huge expansion of acres. Penner says this anticipated expansion of acres may not happen, as we are on the horizon of maxing out acreage.
“[If we] add another 7 million tonnes of crush capacity, that’s probably seven and a half million acres you’d have to add, if you were just doing it based on acreage expansion. Now yields have been generally trending higher, and those kinds of things,” he says. “So maybe there’s a bit of relief that can come from increasing yields. But our crop over the last number of years has been pretty stagnant — apart from last year — somewhere between 19 and 21 million tonnes. So if you take 17 million out of that for domestic crush, you’ve got very, very little left for the export market.”
Looking at the export market specifically, the shift in the balance sheet could have other implications as well, causing ripple effects into other countries — with acreage expansion elsewhere. Penner says that acres will likely expand in the Black Sea region, Australia and maybe even in the U.S.
“There’s a number of areas where there will be ripple effects well beyond our borders,” Penner notes .”The market itself here is going to change significantly. If we’ve been previously exporting 10 to 11 million tonnes a year, and suddenly you take six, seven million tonnes of that out of there, that’s a whole lot less travelling on rail to the west coast, a whole lot less going through Vancouver terminals.”