Ceres Global Ag Corp (Ceres) said the decision to pause the facility build is due to a variety of factors, including but not limited to, inflationary pressures resulting in higher costs than initially projected and shifting macroeconomic conditions.
The company has thus ended an equipment design and supply contract relating to the planned crushing plant, with the aim of reducing project-related contract liabilities.
“Termination of this contract and suspension of the project will result in a fourth quarter impairment charge,” it said.
Ceres said it will include that when its reports its fourth quarter and fiscal year-end results later this year. It estimates the impairment will be in the range of $25m to $30m.
The company also said it intends to continue to explore avenues to pursue a canola crush project of some form in the future. However, there is no guarantee that such an initiative will come to fruition, it added.
May 2021 saw Ceres first reveal its plans to build a $350m integrated canola processing facility in Saskatchewan with it saying the plant would help meet the growing global demand for canola products. The facility would have had capacity to process 1.1 million metric tons of canola and refine over 500K metric tons of canola oil annually.
Ceres said, at that time, that it was engaged in discussions with other interested financial and industry players to fund the project.
Canola processing expansion on the horizon
In April last year, Cargill announced it was going to add 1m metric tons of additional canola crush capacity in Canada, with a new processing unit, also located in Saskatchewan.
In April 2022, it announced it was moving ahead with the build, having secured 247 acres from the Global Transportation Hub (GTH), outside Regina, for $38m. The plant will be operational in the early part of 2024.
Competitor, Viterra Inc, also revealed in April 2021 its plans to build a canola-crushing plant in the same location, though with a slightly later timeline in terms of it being operational: towards the end of 2024. That plant would crush massive volumes, up to 2.5m tons of canola per year. In June 2022, the company said this project was at the engineering stage.
Richardson International announced in March last year that it would be expanding its canola crush plant in Yorkton, Saskatchewan, to increase capacity to 2.2m tons, just shy of the projected volumes announced by Viterra.
Canadian farmers produce about 20 million tons of canola annually, according to the Canola Council. Saskatchewan producers account for about 11 million of that volume.