Canada: Coming canola crush capacity delayed

Canada’s canola crush buildout is not going as smoothly as planned, according to the U.S. Department of Agriculture.

“Project delays in 2023, 2024 and into 2025 have slowed the growth of crush capacity,” the USDA’s Foreign Agricultural Service (FAS) stated in a recent report.

Capacity is expected to reach 10.26 million tonnes by the middle of 2024 and 11.26 million tonnes by the end of 2025, according to the agency.

The FAS stated that the 2025 number incorporates known project delays described by industry contacts.

“The downside risk to this forecast include further project delays,” the FAS said in its Canada Oilseeds and Products Annual report.

Two more crush projects are slated for completion in 2026 and beyond.

“No firm dates for the latter two projects have been announced,” said the FAS.

Chris Vervaet, executive director of the Canadian Oilseed Processors Association, doesn’t think “delay” is the right word to use.

“Building capacity takes time,” he said.

He noted that three of the five projects announced since 2021 are under construction.

“There’s a lot of positive momentum on the buildout of this capacity, to say the least,” said Vervaet.

He declined to comment further on the suggestion that there have been delays and could be further deferrals.

The FAS report fails to detail why crush capacity is coming online slower than anticipated and the extent of the delays. But it did state that crush expansion is tied to burgeoning renewable diesel demand and there is a major hurdle on that front.

Tidewater LLC opened Canada’s first renewable diesel plant in November 2023 in Prince George, B.C. It can produce 170 million litres of the fuel per year with used cooking oil, tallow, canola oil and soybean oil as feedstocks.

Braya opened the country’s second plant in February in Come-By-Chance, Nfld. Its capacity is 824 million litres per year and its primary feedstock is soybean oil.

Those two projects are part of seven renewable diesel plant announcements in Canada that would result in a combined 4.25 billion litres of annual capacity if they all get built.

But the FAS said those projects were placed in jeopardy when U.S. President Joe Biden’s administration announced significant renewable diesel production tax credits in the Inflation Reduction Act (IRA).

“Canadian renewable fuel production could be significantly reduced from what was initially announced unless the Canadian government offers similar announcements to incentivize renewable fuel production or investment,” stated the FAS.

Vervaet is in lockstep with the agency on that observation.

“We do need a response here in Canada to the IRA,” he said. “We are waiting with bated breath in terms of what might come out of the budget.”

He is referring to the federal government’s Budget 2024, scheduled to be tabled April 16.

The Canadian Fuels Association (CFA) hopes Ottawa will respond to the threat posed by the U.S. IRA in that document.

“We’ve reached a critical intersection, and the 2024 federal budget must set the right conditions for industry investments in Canadian biofuel solutions to level the playing field with the very generous IRA clean fuel production tax credits,” CFA president Bob Larocque said in a recent press release.

There is $12 billion in biofuel projects awaiting final investment decisions in Canada over the next year, according to CFA.

“Without support in the 2024 federal budget to help pave the road ahead for more investments at home, several projects — including some that have already been announced — are at significant risk of relocating elsewhere or being cancelled outright,” said Larocque.

Vervaet said Canada’s expanded crush capacity will start coming online this year.

The FAS is forecasting that there will be 10.9 million tonnes of crush in 2024-25, up from 10.5 million tonnes in the current crop year.

Agriculture Canada is forecasting 10.5 million tonnes of crush in 2024-25, the exact same amount as this year.

Vervaet said crush is happening at a record pace this crop year and he expects even more next year as capacity comes online.

COPA is in the process of updating the capacity numbers on its website.

Tags: canola, Canada, Production, forecast, project, crush, biofuel, capacity, renewable fuel