Canadian canola companies build on homegrown demand

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Terry Tieland, wearing a hardhat, white smock and glasses with protective corners, walks down a set of stairs into the guts of one of Canada's largest oil-processing plants. The facility houses giant metal holding tanks full of refined oil and additives. The plant transforms them into finished goods. Most of the plant's oil-based products stay in Canada, but some are exported to the United States, China, India, the Middle East and beyond.

"You should be hit with the smell of margarine or buttery flavours," says Mr. Tieland, the plant's operations manager. It smells like a movie theatre. Pop artist Meghan Trainor's All About that Bass is playing.

This is Winnipeg-based Richardson International Ltd.'s canola oil processing and packaging operation in Lethbridge, Alta. It takes canola oil, produced across the street at Richardson's crushing and refining operation, and makes more valuable goods fit for human consumption.

It's just one part of an industry that's addressing a timeless Canadian complaint about its natural resources – that the country exports everything from raw timber to iron ore and therefore misses out on the so-called "value-added" part of the production chain. Canada exports about half the raw canola it produces, but companies such as Richardson and Cargill Ltd. are also expanding their Canadian canola crushing, refining, processing and packaging plants, as farmers grow more of the lucrative oilseed.

"There's heavy demand for the products we're producing," said Pat Van Osch, Richardson's senior vice-president in charge of quality assurance and manufacturing. The United States is Canada's largest customer for canola oil and meal. "Rather than moving the [raw seed] … to an export market, then processing it and then having to find markets … there's homegrown demand for what we're producing."

And it is valuable. Saskatchewan exported $2.5-billion worth of canola seed last year, making it the province's most valuable agri-food export. By way of comparison, Saskatchewan exported $2.2-billion worth of non-durum wheat last year. The province also shipped $1.3-billion in canola oil out of the country and $786-million in canola meal, according to the government's 2014 export report.

In Alberta, exports of raw canola hit $1.8-billion in 2014, four times more than in 2004, according to the province's 10-year review of exports released in August. Alberta's canola-oil exports tripled between 2004 and 2012 to $814-million, the report said. The value of canola-oil exports, however, hit an eight-year low of $325-million in 2014.

Farmers produced 15.6 million tonnes of canola in Canada in 2014, the second-best canola crop after the 18 million tonnes in 2013, according to Statistics Canada. Collectively, Canada's 14 crushing and refining plants can crush 10 million tonnes of seed and churn out 3 million tonnes of refined oil and 4 million tonnes of meal per year, according to the Canola Council of Canada.

The domestic canola processing industry, which includes companies such as Viterra Inc., Bunge Ltd., Archer Daniels Midland Co. and France's Louis Dreyfus Group, is growing.

Richardson, for example, can crush and refine up to 523,500 tonnes per year, up from 418,800 tonnes per year before its last round of upgrades.

At Richardson's crushing and refining plant in Lethbridge, an automated machine squeezes margarine with the consistency of soft ice cream into blue plastic bags inside cardboard boxes rolling along conveyor belts. Industrial bakers will use this margarine to make delicate pastry crusts. Other machines pour streams of golden-coloured frying oil into 17.3-litre plastic jugs, cap them and then apply Canola Harvest labels – Richardson's own brand. Food-service companies will use it to make products such as potato chips. A handful of manual labourers are part of the repetitive process, placing jugs and boxes on the conveyor belts and folding the tops of the blue bags into their cardboard boxes. The margarine, oil and other products produced here are generally sold in the local market – Western Canada and the United States – while a small amount makes its way overseas, complete with labels sporting foreign languages.

In Yorkton, Sask., the company can now process 1,047,000 tonnes of canola seed each year, up from the 837,600 tonnes it could absorb when it opened in 2010. Cargill opened a crushing plant in Camrose, Alta., in July, capable of processing about 1 million tonnes of canola annually. It also opened the company's largest refinery in North America this summer in Clavet, Sask. It can refine about 450,000 tonnes of canola oil each year.

"We believe that the Canadian [processing] industry and our own plants are big enough and can be competitive with any plant in the world so long as there is open and free trade," said Ken Stone, the vice-president of Cargill's grains and oilseeds business.

Back in Lethbridge, at Richardson's crushing and refining plant, supervisor Olmedo Cardona, an engineer from Colombia, walks through the maze of industrial equipment. It smells like chaf where the trucks deliver canola seed, earthy cereal where the kernels are first crushed into meal that looks like cornflakes, and then like a deep fryer heating light oil as the machines squeeze out the target product.

"When I go home smelling like oil, that's good," he said.