April 12, 2012

Canada's rapeseed crushers cashing in on US demand

As demand for rapeseed oil heats up among US makers of biodiesel and food products such as potato chips, Canada's rapeseed crushers are processing the oilseed at a record-brisk pace.

The US has long been a key export market for rapeseed, Canada's second-biggest crop after spring wheat, but its appetite has spiked in the past year.

In September, the US Environmental Protection Agency (EPA) approved use of Canadian crops in US bio fuels, allowing fuel makers to collect tax credits for using them. The move had an almost immediate impact on Canadian rapeseed oil shipments.

Biodiesel-based demand for rapeseed from the US tends to be sporadic, depending on market conditions for fuel makers and how the price of rapeseed oil compares with soyoil, said Pat Van Osch, vice-president of oilseed processing for Richardson International Limited.

The US food market for rapeseed oil has also been strong. "We've taken market share there as well and we've been able to do that because rapeseed oil has been trading close to or at parity with soyoil," he said.

Canadian rapeseed processors have crushed nearly 4.6 million tonnes of seed in 2011-12, well ahead of the previous year's pace, which ended with a record 6.3 million tonnes crushed, according to the Canadian Oilseed Processors Association.

Much of the oil has headed south, as Canada exported nearly 770,000 tonnes of rapeseed oil to the US from last August through January, up by almost one-third over the previous year's record-high exports.

The US Congress has set a goal of blending 36 billion gallons of renewable fuel into transportation fuel by 2022. A fraction of that total - one billion gallons this year - is set aside for biodiesel produced by biomass such as crops, said Alan Weber, an adviser to the Washington-based National Biodiesel Board.