September 14, 2012

Canola Promoted as Alternative Winter Crop in Southern Brazil

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Known as the "winter soybean" canola is gaining converts among farmers in southern Brazil as an alternative crop for winter production. While canola remains a minor oil crop in Brazil, its supporters feel that there is a niche for the crop as an alternative to soybean oil in the production of biodiesel.

Canola is inexpensive to grow in southern Brazil, its yields are good and the price accompanies that of soybeans. Canola must compete with safrinha corn and wheat for acreage in Brazil. Canola has lost some ground to corn due to the record high corn prices, but it competes very favorably with wheat, which has been losing acreage in southern Brazil in recent years.

In Parana for example, there is currently 11,600 hectares of canola production, but industry officials feel that could increase as much as ten times in the future years. The canola produced in Parana today is used only for food production and the acreage would need to expand to 100,000 hectares or more before it could start to be used as a substitute for soybean oil in the production of biodiesel. Canola is seen as a good substitute for soybeans because it is 40% oil compared to 20% for soybeans.

Currently, 80% of the vegetable oil used in biodiesel production is soybean oil, which is the limit set by the government, and the government is trying to incentivize the production of alternative oils such as palm oil, canola oil, peanut oil, nut oil, etc.

Companies that are interested in using canola oil for biodiesel production are offering a package of incentives for farmers. The package includes technical assistance to produce the crop and a guarantee to purchase 100% of their production at the current price of soybeans in the local area. The response has been very positive and many farmers are planting canola in areas that they would have left unplanted over the winter months. As a result, canola acreage is expected to reach 20,000 hectares or more in Parana in 2012/13.

The state of Rio Grande do Sul is currently the largest producer with 26,000 hectares, but production is expected to expand in other southern states such as Mato Grosso do Sul and Sao Paulo. According to Conab, Brazil produced 52,000 tons of canola in 2011/12 and that is expected to increase to 55,500 tons in 2012/13.