January 30, 2012


Canada's canola crush margins stay firm


Canola crush margins for western Canadian processors have been holding steady as demand for the canola oil product remains strong.


Strong demand for Canadian canola oil domestically as well as internationally continues to offset the negative impact of a strong Canadian dollar.


"Based on my calculations, processor margins are currently running in the C$94-$95/tonne (US$93.51-US$94.51)," a private commodity trader said. This was seen as being historically high, but in the mid-range of modern-day levels ranging from the low C$80's (US$79.51) to well above the C$110/tonne (US$109.43) mark.


Canada's canola processing sector was said to be running "full out" at roughly 85% of its total capacity, Mike Jubinville, an analyst with ProFarmer Canada said. He pegged Canada's current canola crush capacity at the 8.0 million tonnes level which compares with the 7.5 million tonnes available at the end of 2010. The capacity at the end of 2013 was expected to be above 8.0 million tonnes based on current expansion of plants in Canada and as new facilities are built in both Canada and the northern tier US states.


The Market Analysis Division of Agriculture and Agri-Food Canada estimated Canada's canola crush in the upcoming 2012-13 (Aug/July) crop year at a record 6.800 million tonnes. This would surpass the anticipated 2011-12 record of 6.500 million and the current record of 6.310 million that was established in 2010-11.


"Crush capacity has certainly doubled/tripled over the past couple of years, and it doesn't look like the industry is finished with its expansion quite yet," Jubinville said.


At the same time profit-margins have also improved, said the trader, noting that just five to ten years ago the margins were running in the red.


Sales of Canadian canola oil have been running at high levels and were likely to continue at those levels in the upcoming new season, Jubinville said.


He said the European rapeseed crop was not as large as had been anticipated.


"The European outlets will need to import canola oil, but will likely source that supply from Australia, which has also produced a large canola crop," he said. However, with Australia's canola going to Europe, that will leave more Canadian canola oil sale opportunities in the Asian market, particularly China.


Data from the Canadian Oilseed Processors Association (COPA) showed that 3.012 million tonnes of canola have been processed so far during the 2011-12 crop year, ahead of 2.823 million tonnes at the same time in the 2010-11.

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