Western Canada's Canola Boom

The extraordinary emergence of Canada’s Canola industry has been told before, but the fine details are laid out in this article.  In another article we learn that the oil has the processing versatility of olive oil and is well positioned to challenge olive oil in the kitchens.

I recall the first news on the oil’s discovery and I am sure that the health profile mattered little at the time.  It is canola’s great fortune that its profile puts it at the top of the health list and it gas become everyone’s low cost and healthiest oil option.

The pleasant surprise is that all the processing tends to take place close to production.  Thus it has been also a driver for those jobs also.

Competition will slowly sort itself out, but the fact remains that the ability of this oil to also morph into a high end product dependent on flavor bodes well for its capacity to face down any challenges whatsoever.

Canola: Western Canada's other oil boom

GORDON PITTS

ALMEDA, SASK.— From Wednesday's Globe and Mail

Published Tuesday, Sep. 20, 2011 6:48PM EDT

http://www.theglobeandmail.com/report-on-business/economy/canola-western-canadas-other-oil-boom/article2173456/singlepage/#articlecontent

Brent Dunnigan is giving new meaning to the term oilman.

He drills for it, but he also grows it in the canola plants that cover wide swaths of his 7,000-acre farm in southern Saskatchewan.

“I deal in both oils,” he says, wheeling his pickup from a drill rig outside his home town of Alameda, to the golden fields of canola nearby, where the Dunnigans have farmed for 130 years

Since persuading his skeptical father to plant the newly designed seed in the early 1980s, his farm and others across the Prairies have seen canola reap the perfect alignment of higher yields and strong prices, driven by innovative science and rising demand.

A plant that didn’t even exist a few decades ago is now King Canola, a supercrop that generates a high-protein cattle meal and a vegetable oil that’s highly coveted for its health benefits. In 2010, the plant was the most valuable cash crop in Canada, with $5.6-billion in farm sales. It bypassed wheat – with $3.5-billion – which, although enjoying a price surge recently, has often languished from low prices and shifting markets.

Given all its economic spinoffs, such as transportation and processing, canola is a $15.4-billion industry in this country. According to the Canola Council of Canada, $14-billion of that activity is generated in the West.

“It’s the one crop that farmers are pretty sure they can make money on,” says Peter Phillips, a University of Saskatchewan economist who studies the impact of agricultural research. “It’s one of our visible and uniquely Canadian success stories.”

That story seems likely to continue, although a severe global downturn could cut into growth in U.S. and foreign markets – as could a narrowing in the pipeline of research and development money, much of which is spent in Canada.

To farmers like Mr. Dunnigan, canola oil's sharp rise over the past few decades represents nothing less than a revolution in the fields. In the Prairies, the crop is as much a part of the national identity as Sidney Crosby or maple syrup. And in many pockets of Canada's Big Middle, it has helped breathe new life into communities facing economic decline.

Profit-making from canola stems from of two landmark research breakthroughs. In the 1970s, scientists took a mundane plant called rapeseed – traditionally used as an industrial lubricant – and blocked out inedible acids to create an oilseed cultivar fit for human consumption. The seeds also contained very low levels of saturated fat.

The result was canola – short for “Canada oil, low acid.” That was the new seed that Brent Dunnigan brought home to his dad in 1981.

The second innovation took hold in the 1990s, with the emergence of a genetically modified seed tolerant to commonly used farm herbicides. That meant more flexibility and productivity for farmers, as they were moving away from summer fallow and toward little or no soil tillage. They could insert canola efficiently into crop rotations, combining it with wheat, barley and legume crops.

The next big boost came from the customer. While the genetically modified aspect is controversial – and Europe has banned the import of canola seeds – canola oil has continued to build market penetration as health took top place in consumers’ priorities.

 In Canada’s Big Middle, canola has provided the economic boost that hydrocarbons have often failed to deliver – a strong value-added component in Canada. Canola crushing, refining and packaging plants dot the landscape of Alberta, Saskatchewan and Manitoba, creating jobs and industrial spinoffs.

Canola has helped build a boomtown about 235 kilometres north of Mr. Dunnigan’s farm – in Yorkton in Eastern Saskatchewan, which is emerging as the canola capital of Canada.

Prosperity is evident driving down the wide main drag, known as Broadway, which is hectic with pickup and transport trucks, many displaying the names of agribusiness players such as Cargill Inc. and Viterra Inc.

The hub is a cluster of agribusiness operations on York Road, in the industrial north end. The showpieces are two new canola-crushing plants owned by Winnipeg-based Richardson International, and by LDM Foods, a joint venture of Louis Dreyfus and Mitsui & Co. Ltd., both global trading companies. Between them, the two new plants employ more than 150 people.

Benefiting personally from this whirlwind is Faisal Anwar, who got his masters degree in local government from an Ontario university in 2009. It was in the middle of the last recession and jobs in Central Canada were scarce. Checking out the Internet, Mr. Anwar discovered Yorkton, a growing city of about 20,000 in a province that was taking off economically. “It was the sleeping beauty that had just woken up,” he says.

That was 2½ years ago and Mr. Anwar, 39 and now Yorkton’s economic development officer, is sitting on an agribusiness-fuelled expansion. The city is having all the challenges of growth, he says, pointing to shortages of housing, pressures on education and medical care, and an ambitious growth plan for the next decade.

For canola processors, Yorkton’s advantage is that both the Canadian Pacific and Canadian National railways service the city. It means the crushing plants can go with either railway, moving their output with quick turnaround times.

LDM, for example, produces a refined, bleached, deodorized oil that comes out of the plant ready for consumption, and is shipped to food marketers in Canada and the United States.

Yorkton is not a one-trick pony – the area boasts a number of potash sites, both operating and planned – but canola is a big part of the growth. The only downside is the possibility that the global business will peak.

One major threat comes from a traditional rival, soybeans, which contain a lower proportion of oil than canola seeds, but are relatively richer in cattle meal. The U.S. soybean industry, in particular, is determined to develop strains to improve the oil content.

Canola has also loomed large in the debate about the future of the Canadian Wheat Board. In past years, farmers have profited in canola’s open markets, while board-sold wheat has often suffered in comparison. For some, it is one more argument for killing the agency – although global markets are probably the biggest factor in the disparity.

Also, canola has generated a value-added industry in Canada, while wheat is exported mainly in its raw state. It partly reflects the nature of the two crops – wheat travels better in its original state, which means more milling is done close to market. Now, the canola industry sees another promising application in biodiesel production.

Canola’s relative dynamism is also explained by the genetic makeup of the seeds. Because canola’s properties are so variable, farmers tend to buy new seed each year, providing incentive for seed companies to invest in genetics. Much of farmers’ wheat seeds come from their own bins, and wheat remains a more stable, low-investment product.

This year, through the southern Prairies, wheat and canola crops were in the same boat – suffering from extremely wet conditions. Mr. Dunnigan was lucky because his land is high, and he was able to seed most of his acreage – in a region where many farmers planted less than 10 per cent.

Although the oil he has to drill for is the more profitable business for now, Mr. Dunnigan says “the one in my heart is my farm. Canola has been a good business over the years. It’s saved a lot of farms in this area.”