March 16 – What Does the Canadian Protein Supercluster Mean for Peas Demand?

With India out of the market, it looks like the Canadian government and private businesses are taking matters into their own hands…

With India out of the market, it looks like the Canadian government and private businesses are taking matters into their own hands…

As we know, India put in place import tariffs to support domestic growers and lift domestic prices artificially. It becomes obvious that this lucrative market for Canadian pulse exports is no longer available.

From a business strategy standpoint, it is not wise for an entity to rely on a dominant supplier or a customer. It is like putting your eggs in only one basket.

Further, it is a sure thing that reliance on diversified sources of demand, rather than one, is a much better strategy.

With this thinking in, strong local demand triggered by a thriving Canadian pulse processing sector can benefit Canadian pulse growers. Ultimately, success will be dependent on how the innovative the Canadian pulse industry and its non-farmer players can get.

The recent announcement about the protein supercluster getting $150 million from the Canadian government should certainly open the door for innovation.

One parallel here that can be made is to that of the success story of the Canadian canola industry.

While, on one end of the spectrum, giving out $150 million over 5 years to this group stirred a wave of critics in some media outlets such as National Posts that in plain language called the initiative a waste of money or a “giveaway”. Keep in mind that about another $400 million has been committed to the project from the private players involved in the supercluster.

At the other end of the spectrum is the Canadian pulse industry among which the news generated lots of excitement.

Pulse industry reps said that they expect the bulk of government money will be spent to improve processing technology, sustainable production; improving protein quality and yield; and marketing.

In plain language, value-add programs that increase domestic demand is being pursued

One promising technology is the pulse fractionation — the process that separates out the protein, starch, and fiber from pulse seeds (primarily peas at present).

An increase in processing capacity, while delayed (as previously discussed) is part of this value-add: to date, there are 5 pea processing plants that are in various stages of being built on the Canadian Prairies.

Industry representative asserts that this processing base is going to meet an increasing trend in growing demand for plant-based proteins in consumer diets. It’s estimated that this demand for plant-based protein will be valued at $13-billion a year around the world.

That being said, pulse consumption in Canada has gone up 30% over the last three years!

This year, in 2017/18, Agriculture Canada pegs pulses domestic use at 1.47 million tonnes.

This is technically down 3% from the 1.52 million tonnes used up within Canadian borders in the 2016/17 crop year.

Looking into 2018/19 though, Ag Canada sees a further reduction in domestic pulse crop demand, down 10% to 1.34 million tonnes.

Specifically for peas, domestic demand has been averaging 830,000 tonnes a year. But it seems to be trending down as, in 2017/18, that number is slightly lower at 821,000 tonnes. The forecast from AAFC in 2018/19 is pegged at 815,000 tonnes.

Moving past that into the 2019/20 crop year, it’s likely that a few of these aforementioned plants will come online and thus, will push domestic Canadian peas demand up above 1 million for the first time since 2015/16.

All in all, we can’t blame any pulse crop producer for scratching their head about the product still in the bins and what the rotation should look like in 2018/19.

At this point, it’s about managing opportunities that become available. If we start to see an increase in prices, unless it specifically is because of India, we wouldn’t necessarily expect those prices to stick around.
Until further comeback of the Indian pulse export demand or an increase in the world demand for pulses, we have to manage risk proactively and ask our industry spokesperson to diversify the market.



Ottawa’s big cheque will pay even bigger dividends, says pulse group

Critics are calling it “corporate welfare,” but the supporters of a protein supercluster say $150 million-plus in federal funding will turn pulses into the next canola.

There’s never complete buy-in for this sort of government action, but projects like this typically aren’t possible without government funding, said Ron Styles, acting president of Protein Industries Canada.

“You don’t find many places where these types of programs don’t have some form of government support,” said Styles.

“These ventures are very, very risky, and private companies are looking for some sort of return. In the initial phases, they may not believe the return is there, so you need government participation.”

The federal Liberal government announced last month it will give $950 million to five superclusters over the next five years. (The other four focus on artificial intelligence, advanced manufacturing, digital technology, and oceans-based industries.)

That announcement was panned by some as a giveaway, with National Post columnist Andrew Coyne saying such schemes are based on the faulty assumption “that governments know better than private investors how and where to allocate capital,” and others criticizing the lack of detail on how the money will be spent.

But Protein Industries Canada says it has already secured more than $400 million in matching private funding.

And while the specifics — including exactly how much federal cash it will get — aren’t nailed down yet, Styles said his group expects that 60 per cent of the money will be used to improve processing technology. (Three other areas — sustainable production; improving protein quality and yield; and marketing — will split the remaining 40 per cent.)

“It would be premature to point to very specific technologies until we have had time to work more closely with our stakeholders to arrive at decisions or conclusions on what fits best,” said Styles. “Starting later this year, we will be engaging our stakeholders more formally both as a group and individually to sort these questions out.”

But very promising technology could make Canada a world leader in processing protein ingredients from pulses as well as from hemp, oats, and canola, he said.

“It’s about both improving existing processing through the introduction of new technologies such as AI and machine learning, plus adding associated systems that address issues such as traceability,” said Styles. “We need to bring in new processing facilities and technologies for specific crop proteins where none exist on the Prairies at the present time.”

That sort of effort would build on the already considerable investment in pulse fractionation — the process that separates out the protein, starch, and fibre from pulse seeds (primarily peas at present) to meet the growing demand for plant-based ingredients, said Alan Hall, new initiatives and pro-ject hunter with the Alberta Crop Industry Development Fund.

“We’ve got five plants that are in various stages of being built on the Prairies as we speak, and that’s a fairly recent thing,” said Hall.

He compares it to the canola industry, which started out exporting raw seed. But then the first crushing plant came online, then another, and then another. There are now 14 crush plants in Canada processing about 10 million tonnes of canola every year.

The only difference with pulses is how quickly fractionation plants are being built, he said.

“These processing facilities seem to be coming on stream at a faster rate than what the canola industry did over the last three decades,” said Hall.

“It’s the same process, but it seems to be ramped up. I’m still in amazement that five plants are going in on the Prairies just focused on peas.

“In the canola world, it probably took 15 years to get to five plants.”

Hall credits this boom to the growing shift toward plant-based proteins in consumer diets. What was initially thought to be a short-term fad has become a longer-term trend, with plant-based protein commanding a $13-billion market around the world.

“The international markets are really starting to pick up on plant proteins as a viable source of protein in human food. It’s really catching fire,” said Hall, adding pulse consumption in Canada has gone up 30 per cent over the last three years.

“It’s the consumer who’s driving this thing. And the processors are now seeing there’s a pretty good market there and they can make a pretty good profit.”

An argument could be made that the private sector is capable of expanding the plant protein processing sector on its own. But Styles argues the sector isn’t growing nearly as fast as it could.

“If you look at protein processing here in Western Canada, there’s not a lot, and what is there could be improved quite substantially,” said Styles. “There’s not one single area that doesn’t need some assistance in terms of improving the processing. This is simply one more avenue to do it.

“We’re here to work with the industry to address some of those challenges and allow for these plants to develop in Western Canada.”

That process will also involve other members of Protein Industries Canada — there are more than 120, including farm groups, universities, and other industry players.

“We are going to have to work with the industry to sort out the specific types (of technologies) since a number are being worked on,” said Styles, adding that includes examining “the costs of that new technology as well as the specific technology that makes sense for the Prairies and even how that technology might need to be adapted.”

These efforts will directly benefit farmers, he said.

“If you can take some of these products, move them up the value chain, and use them in a way that adds value, that’s going to help your farmers and improve returns,” said Styles.

“It makes all the sense in the world to do the processing here if the crops are here.”

H/T: Alberta Farm Express
About the Author
Adrian Uzea

Hailing from a farm in Romania’s breadbasket, Adrian’s keen interest in agriculture inspired him to obtain a Master's degree in Ag Economics from the University of Saskatchewan. Adrian provides deep, original insight for Canadian farmers of grains, oilseeds, and other specialty crops to help improve their bottom line. He was previously a Market Analyst with a provider of grain marketing services like DePutter Publishing.