“The capacity of crush could grow from 11.3 million metric tonnes today to 18 million metric tonnes in three or four years,” said Chris Vervaet, executive director of the Canadian Oilseed Processors Association (COPA).

Vervaet was among the speakers at this year’s CropConnect conference in Winnipeg Feb. 14. His talk focused on the impact of renewable fuels on the canola value chain.

“This is unprecedented,” said Vervaet. “I’ve talked to folks who have been around oilseed processing for the better part of 30 or 40 years; they’ve never seen this kind of growth.”

Roughly 2.5 million tonnes of canola seed equivalent stocks are currently used for biofuel markets in Canada, the U.S. and the EU. Vervaet said it could grow to 5 million by 2026 and could reach as high as 8 million by 2030.

“We’re taking a stab in the dark here a bit, but we feel pretty optimistic about the role of biofuels in seed demand going forward,” he said.

To meet that demand, seven new Canadian facilities have been announced over the last three years to bolster renewable diesel production capacity.

“If it all gets built the way that it’s been described in their press releases, that could be 4 billion litres of capacity over the next four or five years,” said Vervaet.

South of the U.S.-Canada border, another 25 facilities are either operating, under construction or being planned. “If that all comes to fruition in a couple of years time, that’s close to 30 billion litres of production capacity,” said Vervaet. “This is a tremendous opportunity to see more value-added processing occur in Canada.”

–Further coverage to come. 

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North American energy companies are eyeing ways to reduce the long-term carbon footprint of what they sell. A recently-announced U.S. collaboration could benefit southern Ontario growers, where winter canola is usually the variety of choice.

Why it matters: Ontario producers looking to expand their crop rotation and diversify marketing opportunities could look to canola if there’s long-term certainty that it will be a profitable option.

On March 14 canola crusher Bunge, energy company Chevron, and seed giant Corteva announced “a commercial collaboration to introduce proprietary winter canola hybrids” with a goal to “increase the availability of vegetable oil feedstocks primarily for the growing domestic renewable fuels market.”

A joint news release said the companies “plan to introduce the winter canola crop into the southern United States with an intention to create a new revenue opportunity for farmers with a sustainable crop rotation. The proprietary winter canola hybrids from Corteva can be used in a double crop system, following soybeans or cotton.”

Chris Vervaet, executive director of the Canadian Oilseed Processors Association, says there is interest among U.S. energy companies to partner with seed companies to expand canola acres.

Vervaet delivered a presentation during Manitoba Ag Days earlier this year entitled “Fuelling the Future: Renewable Fuels and Crush Expansion” where he said canola acreage is poised to increase significantly across the country as farmers take advantage of that trend.

Citing projections from Advanced Biofuels Canada and the Jacobsen Renewable Fuels Outlook, as well as public announcements about planned construction and expansion by renewable fuels producers, he suggested production capacity for renewable fuels in the U.S. is set to more than double to 20 billion litres annually by 2025.

In Canada, production capacity could conceivably rise in the same period by as much as 20 times, to just over four billion litres annually, if all companies follow through on planned upgrades.

Speaking to Farmtario in mid-April, Vervaet offered that “biofuels is a big deal for our industry right now and I see it becoming an even bigger deal in the not-too-distant future.”

Vervaet represents processor interests on the Canola Council of Canada. Canola has a higher oil content than other commonly grown oilseed crops, with 40-44 per cent compared to 20-22 per cent for typical soybeans. And the crop, especially that grown in Canada using less carbon-intensive farming practices, gives energy-producing companies the opportunity to decrease their overall environmental footprint throughout the supply chain.

In the West, this is due to expansion of conservation tillage practices across the Prairies and the addition of canola to typical crop rotations. In Ontario, where canola is not yet grown on a widespread basis, the long-term carbon footprint of a rotation that includes the crop could potentially be lowered through double-cropping with another crop in the same year. This comprises a research initiative now being pursued by the University of Guelph and Agriculture and Agri-Food Canada.

“These days when we hear about low carbon fuel standards, it’s an opportunity that the energy companies are looking at in terms of taking advantage of credits for reducing the carbon footprint,” Vervaet said. “And this is, frankly, being monetized now in all of these biofuels.”

Five to 10 per cent of Canada’s annual canola production now goes into biofuel, mostly in the U.S. and Canada but also in the European Union. Vervaet said he believes the EU market will stagnate or possibly decreasing in coming years, but the U.S. and Canadian markets could see significant increases over the next 15 years.

Canola council analysis suggests the crop’s use in biofuels could go from 1.8 million tonnes in 2021 to 6.4 million tonnes by 2030. In 2021, biofuels represented nine per cent of the market for North American-grown canola. By 2030, that’s projected to rise to 23 per cent.

The canola council has been promoting expansion of canola into the brown soil zones of southwestern Saskatchewan and southeastern Alberta but Vervaet said the potential in those regions is limited by climate. To meet projected demand growth, “increasing yields will be critical.”

The council wants to see the national yield average rise from 37.7 bushels per acre in 2022 to 52 bushels per acre by 2025, and has led the lobbying charge in Ottawa to resist hard targets for fertilizer use in the federal government’s climate change action plan.

Regarding the Bunge/Corteva/Chevron variety research collaboration, Vervaet said the announcement “has drawn some interest” in Canada’s oilseed sector. He couldn’t confirm any similar private-sector initiatives will be announced north of the border, but “I’m sure that there are conversations happening around that (concept), maybe behind the scenes.”

Farmers participating in a 2022-23 growing season pilot program will contract with a joint venture between Bunge and Chevron to provide the canola for biofuel.

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The report detailed how much canola and soybeans were crushed in Canada. The report was issued weekly and followed by different industry professionals across the country.

Ken Ball of PI Financial in Winnipeg was sorry to hear about the loss of the weekly report when contacted Friday.

“I’ll certainly miss them, that’s for sure. We do follow those pretty closely on a weekly basis and in Canada in general we have a dramatically less amount of timely, current, pertinent information compared to what we get on the U.S. markets from the (U.S. Department of Agriculture) and other sources,” he said.

COPA said crushing data will still be available through Statistics Canada’s annual and monthly statistics. COPA will also continue to release updates on a monthly basis.

According to Ball, it was one of the few timely reports to which the Canadian grains industry had access.

“Lots of the other information we do get is weeks or months old by the time we get it and makes it much less useful, so it’s a shame to lose that,” he said.

Domestic usage reports from the Canada Grains Council are released, but Ball said he liked having the weekly reports from COPA to keep a much closer tab on fluctuations in the crush margins.

A notice attached to COPA’s report for the week ended Wednesday stated any questions about the discontinuation could be directed to COPA executive director Chris Vervaet.

COPA’s Winnipeg office, when contacted Friday, said Vervaet was out of office and unable to answer questions until Monday.

— Ashley Robinson writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting. Follow her at @AshleyMR1993 on Twitter.

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Fund traders started the week sitting on a long position of about 30,000 contracts, and the early selling whittled that down to about 20,000 with some bearish chart signals adding to the declines.

However, concerns over hot and dry weather mounted as the week persisted, and those fundamental issues brought speculators back to the buy side. Heat warnings were in place for much of Alberta and Saskatchewan, which should cut into the yield prospects.

The jury is still out on the size of the yet-to-be-harvested-crop, but with expectations for a rather tight carryout best guesses say the market will need to work to ration about one million to two million tonnes of canola in the 2017/18 crop year.

With only a week left in the 2016/17 marketing year, the domestic crush just passed 9.0 million tonnes in the latest Canadian Oilseed Processors Association (COPA) report. That’s about 700,000 tonnes above the previous year’s total. The Canadian Grain Commission data out during the week placed canola exports-to-date at 10.7 million tonnes, also about 700,000 tonnes above the 2015/16 pace.

As much as concerns over heat stress are underpinning canola, the situation is thought to be even worse south of the border.

A crop tour of US spring wheat growing regions during the week placed average yields at 38 bushels per acre, which would compare with the average of about 46 the previous year. The crop tour didn’t account for the how many acres will be outright abandoned in the drought stricken regions of North Dakota and Montana.

Canadian wheat crops are also dealing with some heat stress, but hard red spring cash bids in the countryside still lost ground as the Canadian dollar rallied sharply.

The currency settled at 80.34 US cents on Friday, July 28, hitting its highest level in 25 months.

Soybeans and corn in the US are also in the midst of the summer weather trade, with the day-to-day forecasts dictating the direction of the market. Forecasts calling for some much needed rain and cooler temperatures were a bit bearish during the week, but both crops remain stuck in rather narrow trading ranges for the time being, with participants showing a reluctance to push values too far one way or the other until they get a better handle on production.

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The canola crush during the week ended Wednesday came in at 200,294 tonnes, according to the most recent Canadian Oilseed Processors Association report.

That puts the crush capacity utilization for the week at 93.7 per cent, and the year-to-date level at 89.4 per cent.

A total of 3.99 million tonnes of canola have been crushed to date, up from 3.48 million at the same point a year ago.

While crush margins have softened slightly over the past month, they are still well above the year-ago levels.

Processor margins were estimated Thursday at $116 per tonne above the nearby futures, compared to just $73 at the same point a year ago, according to ICE Futures Canada data.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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“Having competitive options made available through extended interswitching limits has introduced a level of competition into the system that we have never seen before, allowing COPA members to negotiate better rates and service from rail carriers,” said COPA Executive Director Chris Vervaet in a release.

Canada’s oilseed processors serve the entire value chain and notably farmer customers by creating consistent and reliable demand year-round for their canola and soybeans. Canadian oilseed processors ship to locations in Canada, all 48 continental U.S. states and around the world, the release said.

“The oilseed processors’ need for reliable rail service is essential as plants operate on a continuous 24-7 schedule and like most manufacturers require just-in-time delivery on in-bound seed and shipment of out-bound vegetable oils and protein meals,” Vervaet said. “Extended interswitching is an uncomplicated and transparent mechanism that is well understood and has allowed competitive forces to function in a natural way without the government having to intervene in a more prescriptive manner.”

Extending interswitching limits permanently, enables Canada’s value-added shippers to continue to solidify existing sales relationships through consistent and cost-effective delivery of their products, he said. Furthermore, this provision provides new opportunities to ship to North American customers that previously have not been accessible given logistical constraints.

COPA also noted that there are many other important issues of interest discussed in the Committee’s report including financial penalties to be covered in Service Level Agreements to address service failures.

The report also contains a recommendation to redefine the overall service obligations of the railways to meet the needs of the marketplace via shippers under the definition of adequate and suitable.

COPA is promising to continue working with the government as Minister Marc Garneau prepares to introduce legislation in the spring of 2017.

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Capacity utilization during the week ended Wednesday climbed to 82.8 per cent, which compares with only 66.9 per cent the previous week, according to the latest report from the Canadian Oilseed Processors Association.

A total of 165,368 tonnes were crushed, more than 30,000 tonnes above the previous week.

Domestic crush margins, currently at about $44 above the nearby November futures, are at about half the level they were at the same point in 2014, according to ICE Futures Canada data.

However, the reduced profitability has not yet led to a reduction in processing.

The total canola crush during the 2015-16 crop year to date comes in at 1.187 million tonnes, which is right in line with the 1.19 million tonnes crushed during the first two months of the 2014-15 crop year.

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Crush margins provide an indication of the profitability of the product values relative to the seed cost when processing canola, with exchange rates also factoring into the equation. As of Monday, the canola board crush margin, calculated by ICE, was at about $96 above the most active May contract.

The margins took a $6 hit on Monday, due to a combination of rising Canadian futures, a drop in CBOT soyoil and a firmer Canadian dollar, according to participants.

However, while the futures have traded within a $30 range over the past month, the crush margins have generally held within $5 of the $100 per tonne mark.

At this time a year ago, the margins worked out to about $235 above the futures, as the logistics problems hampered rail movement across the Prairies.

While the current margins are a far cry from those highs, they remain profitable, and domestic processors continue to show solid demand.

Crushers are running ahead of last year’s pace, with 4.25 million tonnes processed in the crop year to date, as of last Tuesday (March 3), according to the latest Canadian Oilseed Processors Association update. That compares with 4.04 million tonnes at the same point the previous year.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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