Surge in canola processing raises the prospect of U.S. crops on Canadian rail heading for Vancouver

(Debra Murphy/RealAgriculture)

The surge in canola processing that’s been announced for Saskatchewan over the last four months is expected to result in a more than 50 per cent increase in Canada’s domestic canola crush capacity, which could have major logistical and trade flow implications for crops grown on the Prairies.

A record 10.3 million tonnes of canola were processed in Canada in 2020, according to Statistics Canada. Over the past few months since then, Cargill, Ceres Global Ag, Richardson International, and Viterra have all announced plans to build new plants, or significantly expand existing facilities, in Saskatchewan. Based on the companies’ announcements, Canada’s canola crush capacity will grow by around 5.7 million tonnes by the end of 2024.

“This is going to cause some major shifts in the industry, certainly for the Canadian industry. Canada exports half its canola, roughly, today. That’s going to go down to 10 to 20 per cent of its canola crop in the future,” said Robert Day, president and CEO of Ceres Global Ag, in a recent interview with RealAgriculture.

“This is going to have a dramatic effect on trade flows, the direction railroads go. They’re going to be moving more products and less seed,” Day said. The company he leads operates the uniquely-located Northgate terminal along the Canada-U.S. border in southeast Saskatchewan.

Given the size of the new canola crush plants, especially Viterra’s proposed 2.5 million tonne plant at Regina and Richardson’s expansion to 2.2 million tonnes at Yorkton, companies are going to have to originate canola by train from elevators across the country to keep these facilities operating efficiently.

“We’ll start to see rail movement from the interior to another location in the interior to feed those plants. I think we’ll see a lot of changes that way,” noted Day.

But while work begins on new facilities that will keep more canola inland, the dust has hardly settled from a similar surge of new construction at grain-handling facilities on the West Coast.

Cargill, G3, Paterson Grain, Parrish & Heimbecker, AGT Foods, and Viterra have all invested in new and increased port capacity in Vancouver over the last five years, and they will be hungry for crops to move through these facilities. Not only will they have room to move more crop, but barring a major increase in canola yields or acres, there will soon be a significant decrease in canola seed exports through Vancouver as new crush plants swallow up more supply.

To the east, meanwhile, the Port of Thunder Bay is also competing for crops grown on the Prairies, and the port is looking to build on its performance last year, which was its best year for grain movement in more than 20 years.

Altogether, the bottom line is there should be more room for exports through the West Coast. Companies that operate port facilities in Vancouver will be looking for wheat, pulses, canola that’s not being processed domestically, and other crops grown in Western Canada to maximize their upgraded port capacity, but some industry insiders, including Day, say they would not be surprised to see U.S. crops begin to cross the border into Canada to be moved to Vancouver.

“I do think it opens up a significant amount of capacity on the Canadian West Coast, and one of the things we’re interested to see is to what extent we see new trade flows with products from different origins, such as the United States, replace some of the capacity and volume as we see it today,” said Day.

There are many other factors, such as U.S. freight rates, crop size, the rules for the Canadian government’s maximum revenue entitlement for CN and CP Rail, the politics of U.S. grain moving north, and more, that will influence how this scenario plays out, but as Day explained, there’s a chance the major growth in canola processing on the Prairies will result in American exporters looking to move their products to overseas customers through Western Canada’s grain transportation system.

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