Indian envoy warns of 'big red line,' days after charges laid in Nijjar case
India's envoy to Canada insists relations between the two countries are positive overall, despite what he describes as 'a lot of noise.'
Soaring demand for Canadian canola oil used in food and fuel has resulted in plans for a massive increase in capacity to process canola seeds, including this week's announcement of a $360-million crush plant project.
But while buyers are lining up, some analysts wonder if there is enough of the crop to go around and doubt all the projects will proceed.
Canola hit record high prices last year due to strong vegetable oil demand and a severe Canadian drought that shrunk crops in the world's top producing country. Palm and soybeans are also in tight supply, helping drive up food inflation.
Federated Co-operative Limited (FCL) and partner AGT Food and Ingredients said on Monday they would build a Saskatchewan plant to crush 1.1 million tonnes of canola annually to supply oil for FCL's renewable diesel facility.
Richardson International, Ceres Global Ag Corp, Cargill Inc and Viterra Inc announced similar plans last year, drawn by demand for canola oil in foods like margarine and salad dressing, or for production of low-emitting fuels.
Combined, the plans would increase Canada's canola crush capacity by 6.8 million tonnes, or 62%.
That is a tall order to fill for Canadian farmers, whose canola production peaked in 2017, said Marlene Boersch, managing partner of Mercantile Consulting Venture. She is skeptical that all of the crush plants will materialize.
"We do have a (crop) production problem. I don't think we'll see these substantial investments for years to come."
Output concerns go beyond last year's drought. Canola acreage also hit a peak in 2017 and yields were flat from 2017-2020 before the drought.
Patrick Bergermann, FCL's associate vice-president of energy roadmap, expects its plant to purchase some canola that would otherwise go for export, which usually accounts for about half the annual crop.
FCL's plant, which may open in 2025, pending Ottawa finalizing its clean fuel regulation, will add value both from generating oil for fuel and from meal for use as a potential food protein source, he said.
"There's still ample opportunity for the industry to add crush capacity," he said.
For crushers to attract more canola seed away from export channels, they would have to bid aggressively for it, which would reduce margins, said Ken Ball, a commodity futures advisor with PI Financial. He expects project delays or cancellations.
Saskatchewan farmer Bernie McClean says the new crush plants will reduce farmers' vulnerability to trade restrictions on Canadian exports, such as from China. Farmers may boost plantings if they can successfully grow canola in hotter, drier areas, he said.
McClean, who sows 40-50% of his fields with canola, does not intend to plant more in the future, however. Sowing canola too often on the same fields can spread crop disease.
"If we get too carried away, Mother Nature has a way of coming around to bite us in the butt," McClean said.
The Canola Council of Canada industry group sees production rising to 26 million tonnes by 2025, a 33% increase from pre-drought output, based on higher yields per acre.
Canola Council Chief Executive Jim Everson expects productivity to increase as companies develop more robust seeds using gene-editing technology, but he could not identify any specific, promising seed products in development.
Demand, however, continues to rise, enticing the crushers.
A proposed rule is expected early this year from the U.S. Environmental Protection Agency approving canola for use in making renewable diesel or greener jet fuel, Everson said.
North American biofuels could consume some 6.5 million tonnes of canola annually by 2030, nearly four times the current volume, he said.
India's envoy to Canada insists relations between the two countries are positive overall, despite what he describes as 'a lot of noise.'
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