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 Move to Trans Fat-Free Vegetable Oils in U.S. to Boost Canadian Canola Demand - Industry Experts

22/11/06 (Soyatech.com) WINNIPEG - The move by US and Canadian restaurant chains to transfat free vegetable oils in their cooking is expected to translate into solid demand for Canadian canola and canola oil in the years ahead, according to industry sources.

At the end of October, KFC Canada announced it would immediately begin to phase in a Canadian-made trans fat free canola cooking oil, and virtually all of the menu items will be zero grams of trans fat when the trans fat free cooking oil conversion is completed in the new year.

By early 2007, virtually the entire KFC Canada menu will contain zero grams of trans fat.

The trans fat free Canadian-made canola cooking oil is being phased in, through the month of November in all KFC Canada restaurants in British Columbia and the Maritime provinces, followed by Quebec and Ontario with all 786 KFC Canada restaurants converted by early next year.

Meanwhile, on November 16, the Taco Bell Corp. announced that it will convert all of its more than 4,200 single brand US restaurants to a new zero grams trans fat canola oil for frying from a partially hydrogenated soybean oil.

Development efforts began more than two years ago with extensive consumer taste tests to preserve Taco Bell's signature flavors, and the transition to zero grams trans fat canola oil is already complete in more than 100 restaurants. All Taco Bell restaurants are expected to be transitioned to zero grams trans fat frying oil by April 2007 nationwide.

Taco Bell called upon Dow AgroSciences to develop the zero grams trans frying oil, and arrived at a unique, naturally stable canola oil. The oil will be supplied by Bunge Oils, a release said.

To ensure the same flavor profile across menu items at multibrand restaurants, such as KFC/Taco Bell locations, these restaurants will switch their frying oil to the same zero grams trans fat frying oil that KFC is in the process of changing to.

"There is no way, no how, that these companies would make a switch without having a canola source locked up already," Mike Jubvinville, an analyst with the farmer advisory service, ProFarmer Canada said. "Considering the amount of canola and canola oil required, there has to be a Canadian connection."

Jubinville speculated that these companies already have contracts with both Canadian and US oilseed processors to supply the transfat free canola oil.

On the heels of Taco Bell's announcement that they will convert to a next generation high-stability canola oil, the company behind the technology, Dow AgroSciences LLC, said it would further increase crop production in 2007, with capacity to provide more than one billion pounds of this new oil.

The new oil, which was developed by Dow AgroSciences, will be supplied by Bunge Oil.

A spokeswoman for Dow AgroSciences would not comment on how much canola area had already been contracted with producers in either the US or Canada.

"I can confirm that area is currently being contracted, but very little else," she said.

Jubinville also pointed out that New York was also in the process of banning transfats in vegetable oils and while rules have not been passed to that effect, every restaurant in New York will eventually be looking for alternative vegetable oils.

McDonalds was also in the process of introducing transfree fats into their cooking oil.

Jubinville said the only limitation in Canada will be the area seeded to transfat free canola varieties over the next couple of years.

"While acreage to these special varieties of canola have been increasing, they will be facing a challenge from the biofuels sector," he said.

Jubinville estimated in order to meet the expected demand for transfat free canola oil, at least half the canola acres that are regularly planted in Canada will have to be of this variety.

"I don't know if it necessarily means more canola acres, but it may mean a shift in the varieties that are grown," Jubinville said. "A potential component that may complicate everything will be the demand for canola from the ballooning biodiesel industry."

Transfat free canola varieties do not yield as well as the canola that is grown for the biodiesel sector, he said. Oil content, yield and transfat free is not an issue when dealing with biodiesel.

"There will have to be some kind of premium maintained in order to keep production of the transfat free varieties high," Jubinville said.

Industry sources said that while there were no clear ideas of exactly how much transfat free canola acres have been contracted by companies such as Dow AgroSciences and Monsanto, it would not come as a surprise that over 1.0 million acres may have already been booked. Some source felt that the figure was actually significantly higher.

Seeded area to canola in the spring of 2006 (Aug/Jly) crop year totalled 13.156 million acres. Based on preliminary information from industry sources, the area that will be seeded to canola in the spring of 2007 should be at least 5 to 10% higher than the 2006 level.

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