KANSAS CITY, MISSOURI, US — Fueled by blossoming demand for renewable diesel production, canola is seeing a surge in production and crush capacity across the world.
Global canola/rapeseed production for 2023-24 is projected at 87.4 million tonnes, a slight decrease from 2022-23, but only the second time that output has been over 80 million tonnes. Top canola/rapeseed producers include Canada, the European Union, China, India and Australia.
The canola plant produces pods that contain small black seeds, made up of about 45% oil, about double the oil content of soybeans. The seeds are crushed to release the oil, which may be used for human consumption and as a feedstock for biofuels production. The solid parts of canola seed are processed into canola meal, which can be fed to livestock and potentially as plant-based protein for humans.
Global crush in 2023-24 is estimated at 81.1 million tonnes, up 300,000 tonnes from the revised 2022-23 crush forecast, according to the US Department of Agriculture’s (USDA) June Oil Crops Outlook. Crush is expected to grow even more with multiple global agribusinesses announcing plans for new facilities.
Canada, the leading canola producer and top exporter, will see some of the most explosive growth, with an anticipated 50% increase in crush by 2024 or 2025. Demand for renewable diesel to meet government requirements is the key driver, said Chuck Penner, owner of LeftField Commodity Research based in Winnipeg, Manitoba, Canada.
“It’s almost entirely driven by government policy, where the government decides fuel sources need to be more sustainable,” he said. “What you see is along with the crush plant, there’s also a refinery being built nearby to produce renewable diesel.”
If realized, the new global crush capacity could mean a shift in trade flows as nations such as Canada, a leading canola exporter, instead start utilizing a larger percentage of their crop domestically. Increased crush also means more canola meal co-products. Finding markets for more meal could be difficult, especially as soybean meal production also increases.
“The huge challenge in all of this is going to be the meal, because if you crush another 6 million tonnes of canola within Canada, and you’re also crushing a whole lot more soybeans in the US, North America is going to be flooded with meal,” Penner said. “There’s only so much you can do with that without going offshore.”
Growing demand
Global canola/rapeseed production is forecast at 87.4 million tonnes, down slightly from an estimated 88.3 million tonnes in 2022-23 but up from 75.1 million tonnes in 2021-22, according to the US Department of Agriculture’s Oilseeds: World Markets and Trade report released in July.
Agriculture Canada said in its June report that production for 2022-23 is estimated at 18.2 million tonnes with about half headed to export and half to domestic crush.
Acreage is expected to increase slightly in 2023-24, with production estimated at 18.4 million tonnes, assuming normal area abandonment and trend yields.
Canada trimmed yield estimates because of dry conditions, Penner said, with drought in some areas. Production took a huge hit in 2021 due to drought, with production only reaching 13.7 million tonnes. Totals bounced back in 2022 but yields were still below average, Penner said.
“We had some strong growth in acreage eight to 10 years ago, but then more recently, those trends have turned decidedly sideways,” he said.
After three record crops in a row, production in Australia this year is expected to be smaller, but not as small as originally expected, Penner said. Production is estimated at 4.9 million tonnes, down 41% from record-setting totals in 2022-23 but still 15% above the 10-year average, according to ABARES. Acreage dropped 11% to 3.5 million hectares but is the second largest area on record.
The EU’s rapeseed production for 2023-24 is forecast at 20.2 million tonnes, with harvested area up 2% from last year.
“In Canada, production has leveled off, but in these other countries it’s been trending higher,” Penner said. “Those kinds of trends could continue, which then fills in the gap that’s left by Canadian canola.”
There is potential to grow capacity in Ukraine, Australia and even the United States, he said. The United States has seen significant growth recently, with canola production increasing 45% from 2021 to 2022 to a total of 1.79 million tonnes, according to the National Agricultural Statistics Service of the USDA. Planted acreage increased from 155,000 acres in 1991 to an estimated 2.28 million acres in 2023-24.
Kansas State University (KSU) researchers have compiled an analysis to better quantify the impact of different timings and durations of heat and drought stresses on seed and oil yields and quality. KSU held informational meetings this May in Kansas and Oklahoma about the crop for new and experienced growers, reaching more than 175 people. The meetings were the result of a partnership between KSU and Scoular, which announced plans in April to recommission a canola facility in Kansas.
Scoular’s plans for the facility in Goodland, Kansas, US, which it purchased in 2021, include renovations to allow for the crush of canola and soybean seeds, which will be used as feedstock for renewable fuels production. Scoular will intake and export product through its already-established process for loading and unloading railcars and trucks.
Crush expansion
The Scoular facility is one of the latest in a flurry of canola crush expansion and new facility announcements that started in 2021. Canada has the greatest possibility for crush expansion with five major announcements since 2021 that will add 6.7 million tonnes of processing capacity by 2025, according to the Canola Council of Canada. That represents a 60% increase from the current capacity of 11.1 million tonnes.
In Regina, AGT Food and Ingredients Inc. and Federated Co-operative Ltd. (FCL) are partnering on an Integrated Agriculture Complex that will include a $360 million canola crush facility with a capacity of 1.1 million tonnes per year.
The complex also will include FCL’s renewable diesel plant, which will use canola oil and other feedstocks such as animal tallows to produce 15,000 barrels per day of renewable diesel. The crush facility will provide about 50% of the renewable diesel plant’s feedstock requirements with the rest coming from other canola crush facilities.
Cargill also has plans for a crush facility in Regina, breaking ground last summer on a facility that will have a capacity of 1 million tonnes per year. Operations are expected to start in 2024. Cargill also said it planned to update and modernize the canola facilities in Camrose and Clavet.
The company is upgrading oilseed facilities in Australia, including more canola capacity at its Footscray facility.
Other Canadian projects include: Louis Dreyfus Co. (LDC), which announced this spring plans to add a crushing line to its Yorkton, Saskatchewan, Canada, facility, doubling crush to more than 2 million tonnes; Richardson International is doubling canola capacity to 2.2 million tonnes at its Yorkton facility; and Viterra plans to construct a 2.5-million-tonne-per-year facility in Regina, with operations starting in 2024.
Whether all the announced projects will materialize remains to be seen. At least one project already has been scrapped. Ceres Global Ag Corp. last June suspended plans for a canola crush facility in Northgate, Saskatchewan, Canada, for various reasons, including higher costs than initially projected and shifting macroeconomic conditions. The $350 million facility would have processed 1.1 million tonnes of canola and refined more than 500,000 tonnes of canola oil per year for food and fuel.
“Because they are generally partnerships between a multi-national grain company and a major petroleum producer, they’ve got pretty deep pockets,” Penner said.
With Canada’s canola production still struggling with dry conditions and dropping yields, it might be difficult for the country to supply the oncoming crush demand with domestic production and still maintain exports, he said. It’s not just the amount, but the speed at which the crush increases are happening, Penner said.
“Canada can’t increase canola production quickly enough to keep up with the rise in demand,” he said. “There’s going to be some serious dips in Canadian exports until we can get production back up.”
Canada is the leading canola exporter, with 8.4 million tonnes exported in 2022-23 and an estimated 8.8 million tonnes expected to be exported in this marketing year.
“It would certainly come out of exports,” he said. “Then you start looking at where the Canadian export markets are. The dominant ones would be China, Japan and Mexico. That’s going to trigger a whole bunch of changes. For the global market, it will need to come from other countries that don’t grow canola as widely or as frequently.”
Penner said the 2021 severe drought was quite instructive in how the Canadian canola industry handles lack of supply. Domestic crushers are the most inelastic demand, so that stayed strong throughout.
“Canola prices hit record levels, but it was mostly the export demand that got rationed,” he said. “We lost a little bit of capacity, and we did import a small amount of canola. Domestic crushers were the most aggressive bidders for canola from our farmers.”
The new capacity is going to put upward pressure on all vegetable oil production, said Tanner Ehmke, lead economist, grains and oilseeds, CoBank. The concern, he said, is oversupply.
“But given the announced expansions and greenfield projects that are online and expected to come online in the next couple of years, that would hint there’s going to be more demand for veg oils going forward,” he said. “There are other feedstocks competing with veg oil, like yellow grease and beef tallow, so the market is flexible.”
Biofuels feedstock
Driving the demand for canola is the demand for renewable diesel, spurred by government policies requiring lower emissions and improved sustainability. Several feedstocks can be used for renewable diesel, including vegetable oils, used cooking oil and animal fats.
Unlike biodiesel, renewable diesel is a hydrocarbon that is chemically equivalent to petroleum diesel and can be used as a drop-in biofuel. It can be transported in petroleum pipelines and be sold with or without blending in petroleum diesel.
Canola is well suited for biofuels production because of its high oil content, providing more feedstock for fuel production and less byproduct, and low levels of saturated fat, which is linked to improved cold weather performance.
Global production of renewable diesel has steadily increased since 2011, when production was just 1.21 million liters per year, according to the International Energy Agency (IEA). Production reached 13.62 million liters in 2022 and is estimated to grow to 16.81 million liters this year, reaching 26.6 million liters by 2027.
In the United States, renewable diesel production skyrocketed 225% in the last two years to 2.6 billion gallons in 2022. Production estimates call for 4.1 billion this year with totals reaching 6 billion gallons and above by 2025, according to farmdoc at the University of Illinois, Champaign-Urbana, Illinois, US.
The United States had 16 renewable diesel plants operating as of December 2022 and another 16 are expected to be operational by the end of 2025. Plant expansions and conversions are pushing capacities to more than 500 million gallons per year, farmdoc said.
One recent policy incentive includes the US Environmental Protection Agency’s (EPA) ruling at the end of 2022 that canola-derived renewable diesel qualifies as advanced biofuels under the Renewable Fuel Standard. Canola industry leaders said the ruling leveled the playing field for canola with other oilseeds and provided a pathway into the US market.
Canola use for biofuel production is estimated at 2.5 billion pounds for 2022-23 and 2.8 billion pounds in 2023-24, according to the USDA.
“Canola use for biofuels has more than tripled over the last year,” Ehmke said. “The market is finding an opportunity with canola oil.”
Coproduct challenge
A major challenge will be finding uses for the meal, Penner said. With increasing canola and soy crush, North America is going to be flooded with meal, and there’s only so much that can be done with that, at least right now.
“Canola meal from existing crush is going to the US and China,” Penner said. “But really it has to compete against soymeal. And we’re going to have a lot more soymeal.”
Drought in Argentina and a drop in soybean meal production opened up some opportunities to move canola meal into the export market, Ehmke said. But when Argentina comes back online, there will be more competition.
“It’s been an opportunity for the past year, to back fill a lot of that export demand that was abandoned by Argentina, but Argentina is going to come back,” he said. “That’s going to be adding increased pressure on North American exports for soybean meal and canola meal. But that will be an opportunity for end users.”
New markets will have to be found, Penner said, possibly in southeast Asia.
“If someone can find new uses for protein meal, they’ll be able to do quite well, because it will be the byproduct now in the North American oilseed market,” he said.
Protein Industries Canada, a Canadian Global Innovation Cluster focused on plant protein and plant-based co-products, said canola protein represents a “significantly underdeveloped opportunity.”
Canola meal use outside of ruminant feed is limited, it said, because of its fiber and antinutritional content. Rather than find new markets, Protein Industries Canada is encouraging creation of new products. Canola protein can be suitable for a range of applications, including meat and dairy alternatives, beverages, bars and baked and ready-to-mix products, according to the US Canola Association.
