Canola Oil Draws Interest, But Faces Soybean Challenge

IT'S not easy being a Cinderella crop. Just ask the canola industry. Canola - a genetically engineered breed of rapeseed - is sought after by health-conscious consumers, can be produced relatively cheaply, and has been getting increasing attention from food processors. But the North American industry faces some big challenges.

Here in Canada, the seven processing companies that crush canola are enduring their second year of hard times.

``It's a very Cinderella crop for the farmer. But for the crusher it's a disaster,'' says Al Huffman, head of CSP Foods Ltd., Canada's largest canola crusher.

A drought-shortened crop last year and heavy Japanese buying have boosted the cost of canola seed that the crushers buy. Meanwhile, the canola oil they sell has been held at low prices because of competition with soybean oil in the United States.

Oil from canola also competes with other cooking and salad oils, made from sunflowers, peanuts, and other crops, but is lowest in saturated fat.

In the US, interest is growing, especially among farmers in Ohio, Indiana, and Georgia, says Eric Rey, general manager for Ameri-Can Pedigreed Seed Company, a Memphis canola breeding concern. Acreages devoted to the fall-planted crop could double or triple in those areas this season.

Almost all the canola used in the US comes from Canada or from the European Community, which heavily subsidizes its crop. Thus US processors also face a squeeze.

Archer Daniels Midland is strongly considering moth-balling its canola processing plant in Velva, N.D., because the low demand does not justify the high cost of buying seed, says company spokesman Dick Burket.

Until canola can compete with soybeans, it will remain a minor crop in the US, agricultural economists say. Canola use stood at 215 million pounds during the period from October 1989 through June 1990, according to the US Department of Agriculture (USDA). That is actually down 24 percent from the same period a year ago. Meanwhile, the use of soybean oil rebounded 18 percent to 9.1 billion lbs.