October 28, 2011 / 4:09 PM / in 6 years

Canada canola oil, meal exports hit record highs

WINNIPEG, Manitoba (Reuters) - Canada is shipping canola oil and meal in record-high volumes, as new Prairie crushing plants work to meet growing soaring demand.

Canada, the top exporter of rapeseed variant canola, shipped 2.4 million tonnes of canola oil and nearly 3 million tonnes of meal in 2010/11, blowing away previous high-volume marks, Statistics Canada data showed this week.

Exports for the first three months of the current 2011/12 crop year are also brisk, said one exporter.

“At the heart of it is overall vegetable oil demand,” said Cory McArthur, vice-president of market development for the Canola Council of Canada. Demand is growing as developing countries improve their diets, he said.

Canola oil is mainly used as a vegetable oil for cooking or in foods like salad dressing and margarine. The meal is used to feed animals, especially cattle.

Demand for canola oil is also accelerating because of its low saturated fat content and favorable properties for packaged food production, McArthur said.

Pepsico (PEP.N) Foods, for example, recently switched to using canola oil in making its Frito Lay potato chips.

“The shift toward healthier eating, whether it’s through food manufacturers looking for healthier oils to use or consumers at the supermarket, that’s a big driver,” McArthur said.

In the last several years, oilseed crushers Cargill Inc CARG.UL, Richardson International Limited and Louis Dreyfus have added capacity to the Prairies, giving farmers incentive to plant more canola.

Farmers harvested a record-large canola crop of 12.9 million tonnes this autumn, according to Statistics Canada.

“The big thing (in Canada) is ... they’ve had a lot of supplies and capacity and they’re crushing,” said Anne Frick, senior oilseeds analyst at Prudential Bache Commodities in New York.

The United States has also been importing more Canadian canola oil for use in vegetable oil, with biodiesel production taking up more domestically produced soybean oil, Frick said.

Canada looks to gain its own piece of the U.S. biodiesel market, after the U.S. Environmental Protection Agency last month approved Canadian crops under the U.S. goal of blending 36 billion gallons of renewable fuel into transportation fuel by 2022.

Canada also shipped more to The Netherlands and Germany in 2010/11 for use in biodiesel after weather problems limited German rapeseed production.

Meanwhile, Canadian canola meal exports have roared back after the United States lowered restrictions in the last year against crushers over the presence of salmonella bacteria.

The U.S., Canada’s biggest export meal market, imported nearly 1.9 million tonnes in the 2010/11 crop year ending July 31, up almost two thirds from the previous year.

Even with more demand for processed canola products, exports of canola seed have remained strong. Canola exports reached 7.1 million tonnes in 2010/11 - one of the highest volumes on record, and this year’s shipments are ahead of that pace.

Canola oil is pricier than soybean oil and palm oil, and will ultimately see demand wane if it gets too high, Frick said.

“Edible oils are basically fungible, so their prices can’t get too out of line.”

For now, all that demand has farmers likely to plant another record-large canola crop this spring, weather permitting.

“It’s all tied to the increased production that’s tied to the increased yields,” an exporter said. “It’s all a good story.”

Editing by Sofina Mirza-Reid

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