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Canola's coming to town

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By Jennifer M. Latzke

With the third largest grain storage capacity in the world, Enid may be the Wheat Capital of Oklahoma today.

But it is poised to become the Canola Capital of tomorrow.

Oklahoma has seen a recent boom in canola production, thanks to improvements in winter canola varieties and a strong domestic and foreign demand for canola cooking oil and other byproducts. The U.S. Department of Agriculture’s National Agricultural Statistics Service last fall estimated Oklahoma would harvest 130,000 acres of canola in 2012, with a production of 182 million pounds of canola. That production is second only to North Dakota.

The popularity of canola as an alternative crop rotation with wheat is rising in the Enid region. And companies like Northstar Agri Industries and others are seeing this trend and bringing investment to the area.

In October 2012, Northstar Agri Industries, a subsidiary of PICO Holdings, Inc., announced it had chosen Enid as the site of its newest canola processing facility. Northstar already has an operating canola processing plant in Hallock, Minn., capable of processing 345,000 tons of canola seed each year.

The Enid location, once fully operational in a few years, will be able to crush 760,000 tons of canola per year. The site will also include a full refinery that can produce 580 million pounds of food-grade refined canola oil and 450,000 tons of canola meal each year.

Northstar President and Chief Operating Officer Neil Juhnke said the southern Plains region is on the cusp of a canola oil boom and Enid was a logical choice of location for this new expanded plant.

“The region provides the most compelling factor,” he said. “The agronomic rotation between canola and wheat for dryland farmers in the region is an excellent fit.” He added that there is between 5 and 8 million acres in the region where canola could become a sustainable and significant crop in rotation with winter wheat. That means from 1.5 to 2 million acres a year could be planted to canola, enough to keep the Northstar plant fully supplied.

“We wanted to be centrally located to a majority of canola acres as possible,” Juhnke added. He said that the company estimates that the rising trend of planted canola acres in the region indicates that by the 2014-15 canola crop the region could provide 100 percent of the plant’s canola. If just 15 percent of wheat acres in western Oklahoma, Texas and Kansas moved into a rotation with canola, that would be 815,000 new acres of canola, enough to meet the plant’s needs.

Northstar is planning to work with farmer-owned cooperatives and private elevators to bring this expanded market opportunity to the region. Grain companies like W.B. Johnston Grain Company in Enid will be vital partners to this grand plan.

“We’ve been talking and involved with this group since their first official visit to Enid, along with the Enid Regional Development Alliance,” explained Joey Meibergen, vice president of Johnston Enterprises, Enid. “Enid is strategically located in the canola area.” Meibergen said he sees this new plant as an opportunity to provide canola growers a consistent competitive price for their crop, as well as improve their wheat production and the cleanliness of their main wheat crops.

As a grain merchandiser, Meibergen addressed concerns that canola acres would compete with wheat acres in the state. He said that encouraging a growth in canola acres is actually beneficial in the long run to the Oklahoma wheat industry.

“The most wheat acres in the state are planted in Garfield county,” he said. “Canola is a perfect crop to follow wheat on wheat ground. It can help us improve the cleanliness of our wheat.” Cleaner wheat means a wider export market for Oklahoma wheat opens up.

“With the Northstar plant coming to town, we can be in a premium market for our canola, instead of a market of last resort,” Meibergen added. “The size of the local market in Enid will give us a consistent competitive price.”

As far as storage options, Juhnke said growers can choose to deliver directly to the plant in Enid, or to a more local partner elevator. “We plan to be flexible with farmers,” Juhnke said. “We know we will have to install and invest a significant amount of storage on site. We will have to store up to one-third of the total amount of crush on site at harvest, so we’ll also have multiple scales.” Two-thirds of the crop will need to be stored in short-term storage at the plant or in participating partner elevators, he added. Fortunately, the area has significant and underutilized concrete storage capabilities just right for canola, he said.

According to Meibergen there is 14 million bushels of licensed capacity within 2 miles of Enid that can be dedicated to canola storage—that’s roughly half a year’s crush. Johnston’s was one of the first grain merchandisers in the state to buy canola, and the company is familiar with the crop’s storage and handling needs.

Meibergen cautioned there are some challenges to storing large amounts of canola for a long term of five months or more. Unlike cereal grains, the oilseed has a higher static pressure and it’s tough to pull air through the grain in storage. Storing canola over a long term in Oklahoma’s heat and humidity in the summers will be challenging. But Meibergen said Johnston’s and other grain handlers are working with Oklahoma State University to address those concerns.

“We will have to monitor and babysit it more through that first sweat,” Meibergen said. But this is nothing new to their employees. He added that the company is working with Northstar to find some innovations from their experiences in North Dakota that could apply to Oklahoma storage.

In addition to being centrally located within the Canola Belt and near large amounts of licensed storage capacity, Enid as a community has much to offer Northstar. Brent Kisling, executive director of the Enid Regional Development Alliance, said, “Enid has more dry grain storage capacity than any other location in America. We have a lot of raw commodity that is grown and comes into the area, but we are not good at adding value.” This new plant, Kisling said, gives Enid that chance.

Kisling explained that the community is engaged in bringing new economic opportunities to town.

“We have an Enid First team, that includes our development alliance, the chamber of commerce, our mainstreet organization, our convention and visitors bureau and our city,” he said. “Enid is fortunate that everybody is trying to steer the canoe in the same direction.”

That direction led to a Tax Increment Finance district that would generate as much as $27 million in incentives over 25 years to bring the Northstar plant to Enid.

“The beauty of TIF financing is that it is a way to take the ad valorem tax that would come off of the project and turn it back into the project,” Kisling said. “If nothing is constructed, then no money goes back into the project. So, we aren’t just writing a million dollar check to someone.” He added that in order to approve a TIF district, however, it takes progressiveness from the school district, the health department, the county commissioners and all the other entities that would have received those ad valorem tax dollars. They have to be willing to forgo those taxes now in order to bring opportunities for the future.

“It passed unanimously in Enid,” Kisling said. “This isn’t just a canola processing plant in Enid that will bring 60 jobs. It’s a new industry to the area.” It’s a new industry that will benefit from Oklahoma’s Training for Industry Program, which work with local career technical institutes to provide industry-specific training that’s supported by the state legislature.

“The Autry Tech Center has been at the table since the first meeting,” Kisling said of the local technical institute. “They have been aggressive in putting together a training program for them.”

Another question that was raised in the process of bringing the plant to Enid was availability of water. Kisling said that the city of Enid was visionary decades ago by investing in water well fields throughout Oklahoma. The plant could use up to 5,000 gallons of water a day for cooling, but overall the process is water efficient according to Juhnke. Still, it was a concern that Enid addressed.

“Some of the TIF money will be use to improve the infrastructure to support the plant,” Kisling said. “That should alleviate our water usage on the east side of Enid and become more efficient. In time of drought that’s the first question you get, but our community stepped up and is ahead of the game.”

Bringing a new industry to a community doesn’t happen overnight, but three things made this possible, Kisline said—a consistent message from elected and business leaders; the willingness to make tough decisions for the long-term health of the community; and a willingness to invest.

“We are really happy with the reception we’ve received,” Juhnke said. “I think we’ll fit well in northwest Oklahoma with our work ethic. We are excited to bring jobs to the region and the overall potential for regional farmers. With an added 1 million acres of canola, OSU has said that could turn into a $1.5 billion net farm revenue increase for the region.”

Jennifer M. Latzke can be reached at 620-227-1807 or jlatzke@hpj.com.

Date: 4/22/2013



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