Growing, Processing, and Selling Omega-9 Canola Oil

Final Report for FNC10-809

Project Type: Farmer/Rancher
Funds awarded in 2010: $5,969.00
Projected End Date: 12/31/2011
Region: North Central
State: Michigan
Project Coordinator:
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Project Information

Summary:

The problem we are addressing is finding a local value-added market for the canola grown. Farmers are hesitant to grow a crop that can only be marketed to a distant market in another country. Currently there are no canola processing facilities in Michigan and our canola has to be shipped to Windsor, Ontario. The canola meal left over from the pressing process is then shipped back to Michigan for dairy feed. This problem is compounded by the fact that we have low acres in canola production so there is little incentive for anyone to start a processing plant. It is difficult to increase the acres because farmers see the transportation expense and the distant market, and are hesitant to plant a new crop with these drawbacks. The solution we want to research builds on our 2-year relationship with Dow AgroSciences (DAS) in growing Omega-9 canola – a value-added specialty canola. Many people in the industry believe that Omega-9 canola oil, because of its high monounsaturated fat (the most healthy fat) and low saturated fat, will become an oil of choice for consumers in the future. The closest processing plant for Omega-9 canola is in Enderlin, North Dakota. Transporting canola seed to Enderlin (900 miles) may be cost prohibitive. Our solution is to research and test a strategy to grow, process, and market Omega-9 oil in Michigan. We propose to do a test run on 1,500 pounds of canola seed, which we can get mechanically pressed in Michigan, yielding between 50 and 60 gallons of canola oil. This oil will then need to be refined to meet industry standards, bottled, and sold at farmer markets, through a website, and to small, local food processors. A Michigan certified kitchen would be rented for processing and bottling. Plastic bottles will be purchased, and labels that reflect the health benefits will be designed and printed. The goals for this are: Goal 1: To use a mechanical press to extract the oil from 1,500 pounds of Omega-9 canola seed. Goal 2: To refine the Omega-9 oil to commercially acceptable standards. Goal 3: To bottle the oil in one-quart plastic bottles. Goal 4: To design a label that incorporates “grown locally” and healthy oil information. Goal 5: To test market to 3 small food processors. Goal 6: To select one farm market to test retailing the product. Goal 7: To work with two farmers to grow Omega-9 canola in 2011. Goal 8: To develop and maintain a website to promote Omega-9 oil, inform the public of its health benefits, and provide information to farmers. Goal 9: To disseminate the information learned.

Introduction:

FARM DESCRIPTION AND PROJECT BACKGROUND
B and B Farms is located in central, northern Michigan about mid-way between Lake Michigan and Lake Huron. Our soils consist of glacial till, primarily sandy, sandy loam, and clay loam types.

B and B Farms has been a family operation for almost 100 years, originally starting with 40 acres of land and progressing to the current 540 acres. There has been a succession of farming changes from a general small farm, to a dairy farm, and today to a largely crop oriented farm operation.

In 2011 we grew 100 acres of canola, 26 acres of Sudan grass, 70 acres of alfalfa hay, and we had about 150 acres in cattle pasture. The remainder of our land is taken up by trees, river and wetlands. Our cropping system consists of growing canola one year, then rotating with another crop such as Sudan grass or alfalfa. This rotation will migrate toward using corn and wheat in the future.

Bonnie and Dan Blackledge and their two daughters, Carissa and Hayley do most of the farming.

The Blackledge Family has traditionally been very progressive, and sustainability has typically been part of the farming operation. Throughout the history of the farm this included crop rotation, using alfalfa as a key cover crop. In the 1960’s much of the land was tiled with clay tile to manage the excess water. In the 1970’s a manure management system was built, including a retaining pond. In the 1980’s Dan Blackledge received the Clare County Soil Conservation Service “Farm Cooperator” of the year award. Today our cropping systems include crop rotation, soil testing, grassed waterways, and attention to maintaining the sustainable farming systems from the past. In 2012 we have been selected as one of the farms in the Clare/Gladwin District for the Conservation Reserve Program for management projects on the West Branch River which flows through the property.

Project Objectives:
PROJECT DESCRIPTION

GOALS:
Goal 1: To use a mechanical press to extract the oil from 1,500 pounds of Omega-9 canola seed.
Goal 2: To refine the Omega-9 oil to commercially acceptable standards.
Goal 3: To bottle the oil in one-quart plastic bottles.
Goal 4: To design a label that incorporates “grown locally” and healthy oil information.
Goal 5: To test market to 3 small food processors.
Goal 6: To select one farm market to test retailing the product.
Goal 7: To work with two farmers to grow Omega-9 canola in 2011.
Goal 8: To develop and maintain a website to promote Omega-9 oil, inform the public of its health benefits, and provide information to farmers.
Goal 9: To disseminate the information learned.

PROCESS
The origins of this project go back about five years to research jointly conducted by B and B Farms and Michigan State University, to see if canola could be successfully grown in Michigan and if it could be processed into biodiesel. We were able to prove that it could be grown, but the economic feasibility of processing it into biodiesel was not good. That project wound down, and B and B Farms continued experimenting with growing the crop, but on a reduced basis as there didn’t seem to be a good market.

A market for the seed was developed with ADM in Windsor, Ontario, and the canola seed was trucked to Windsor. Trucking was expensive, but canola could still be grown for a profit. During this time our research showed that a market could exist in processing the seed for food grade oil. At this point the SARE grant was written to see if we could prove success in that endeavor. The goal was to have a processor crush the canola, and B and B Farms would be on each end of that, as a grower – so we had control of the source and quality, and as a marketer so we could explore different markets and find the profitable ones.

One processor was located and arrangements were discussed with him, but before the project got started it became apparent that he was not likely to provide us with a product, or if he did it might not be of the quality we needed to have. At that point, the SARE budget was revised and we were able to use some of the funds to buy a new press. The press cost about $8,000 of which 25 percent was paid by the SARE grant and 75 percent by B and B Farms.

Pressing oil has proven to be a long and difficult task. Sometimes the press would work and sometimes it wouldn’t. Sometimes we would get a half gallon of oil per hour and sometimes we would get over a gallon per hour. The commercial kitchen in which we rented space was an hour and a half away. Also, seventy-pound bags of canola seed are hard to handle – our plans were to press out 71 of them. We were persistent in pursuing our goal and seem to have overcome most of the problems that arose.

Below is some data from our experience:
• 5,000 pounds of canola were set aside from our shipments in 2011.
• 25 pounds of canola seed will make about 1 gallon of canola oil.
• Canola oil weights about 7.5 pounds per gallon.
• Our goal was to produce 1 gallon of canola oil per hour.
• 30 percent is a good oil yield. Our highest measured amount was 36 percent.

PEOPLE
Farmers who were involved with the project are:
• RJ and Jon Shooks, Shooks Farm Company, Central Lake, Michigan
• Jim Schooley, Schooley Farms, Evart, Michigan
• Gary Wemple, Tustin, Michigan
• Darrel Chilcote, Corunna, Michigan
• Don Ruegsegger, Sears, Michigan
• Glen Paradis, Kewadin, Michigan

Each of these farmers grew canola for at least two years, attended the Field Days, and experimented with different canola varieties. They were all involved in the growing cycle, but not in the oil processing operation. Several meetings have been held with RJ and Jon Shooks on oil processing, and information was shared on a regular basis on project plans, grant progress, and opportunities for future involvement in processing canola seed into oil and marketing it in Northern Michigan.

Business people who have been involved include Bruce Goodman, an attorney with Varnum, LLC; Joe Colyn, CEO of Originz; Jim Padilla, Managing Partner of TPC; Scott Decker, CEO of Alternative Energy Solutions; Bill Goedert, owner of Dip Sensations; and Greg Northrup, partner in Sustainable Partners LLC. Each of these people has been actively engaged in helping the project in some way. Additionally Dow AgroSciences managers, John Kalthoff and David Booher have been involved in working with us on growing Nexera canola in both Clearfield and Roundup Ready varieties. While originally Nexera canola was a focal point for the project because of its healthy oil profile, Dow has declined to license B and B Farms as a processor for its patented Nexera varieties for retail sale. This does not affect the project, with the exception that we are using other varieties instead of Nexera, still with the excellent oil profile of 7 percent saturated fat, 21 percent polyunsaturated fat, and 72 percent monounsaturated fat.

The largest group of people who have helped with the project are from Michigan State University. As mentioned previously, B and B Farms began growing canola in conjunction with MSU five years ago in an attempt to start a canola oil based biofuels industry in the state. Dennis Miller, a professor in the chemical engineering department at MSU was instrumental in getting this going and has remained involved throughout providing advice and guidance. Today he is our “champion” at MSU and makes sure we stay connected at the correct levels within the University. He also does our chemical analysis, and helps make sure the information we use is correct.

Agricultural Extension Agent Jerry Lindquist has provided the practical growing information that B and B Farms used from the beginning. Jerry helped coordinate a trip to canola growers in Ontario, Canada in the early days of the project so we could learn correct growing practices. He also ran fertility trials for us to calibrate nutrient levels that maximized yields based on economic inputs. Jerry has hosted many meetings and has worked hard to help us disseminate information including contacts with TV and radio stations.

In the MSU Crops and Soils Department, Professor Russ Freed has created many contacts with seed companies, fertilizer companies, and markets. He also coordinated all our variety tests, and has been invaluable in interpreting our results to other farmers across Michigan. Russ and Jerry are the educators that we rely on for current genetic, nutrient, variety, marketing, and other information, and for our connection to other farmers.

As B and B Farms started working on the SARE grant and began making plans for processing oil, the MSU Product Center became an important part of our team, providing expertise in food processing and food marketing. One of their facilities, The Starting Block, is the licensed commercial kitchen where we process our oil. Most of what B and B Farms has learned about the “food business” has come from our interactions with them and their assistance in getting our two Michigan Department of Agriculture licenses – Food Processor and Food Warehouse. They have helped steer us through the regulatory issues on everything from the label to marketing.

Research

Materials and methods:
RESULTS

GOALS AND RESULTS
Goal 1: To use a mechanical press to extract the oil from 1,500 pounds of Omega-9 canola seed.

A new mechanical oil press was purchased in the summer of 2011 from AgOilPress in Wisconsin. It is a single screw press with the capacity to press about 25 pounds of seed per hour. B and B Farms found that this yielded about one gallon of oil, with our highest hourly yield of 1.25 gallons per hour. Canola seed contains about 43 percent oil, and we averaged getting about 30 percent out of the seed. On some runs we could get as high as 36 percent, and sometimes as low as 25 percent. Our canola seed was very dry, testing somewhat below 7 percent moisture content, which may have affected the yield and may have contributed to some of the pressing problems we encountered. We pressed a total of about 3,000 pounds of seed which yielded about 120 gallons of canola oil.

Goal 2: To refine the Omega-9 oil to commercially acceptable standards.

One of our discoveries was that “commercially acceptable” standards included “all natural”. Our target market did not want the same oil they could buy on the grocery store shelves. They wanted:
1) cold pressed,
2) non-GMO,
3) not refined,
4) not deodorized, and
5) not bleached.
Because of this our refining consists of letting the oil “settle” in one of our lined 55-gallon barrels until all the solids drop to the bottom. This takes at least a week, and then we bottle it. We fully live up to the “all natural” on our label.

Goal 3: To bottle the oil in one-quart plastic bottles.

The first thing we discovered in bottling is that there was strong consensus that for our market, glass was better than plastic, so we made a change to glass. Our glass bottles and caps cost us $.61 each. The next thing we learned is that a pint sized bottle was better than a quart, so we made that change. We have found a local Michigan supplier and buy them 420 at a time (35 cases). The bottles are sterilized in an oven at 180 degrees for 20 minutes, then filled, capped and sealed.

Goal 4: To design a label that incorporates “locally grown” and healthy oil information

(See label attached to this report.) Our label has received more acclaim than any other part of our project, and we have decided to build our brand around it. The label was reviewed and approved by the Michigan Department of Agriculture and revised to ensure all information could be verified.

Goal 5: To test market to 3 small food processors.

We originally thought our primary market would be food processors that would use it in manufacturing healthy food products. We discovered that a greater market existed in wholesaling to small food and specialty stores. As of December 31, 2012 we have one restaurant using it in cooking and food preparation, five retailers and one farm market. Our oil is more expensive than grocery store brands because with our mechanical press we only get about a 30 percent yield. Large refineries that use chemical processing get nearly all of the 43 percent oil content out of the seeds. For this reason it is marketed as a specialty product.

Goal 6: To select one farm market to test retailing the product.

The farm market we selected was the Chicago Farmers Market on Division Street. Over the course of the summer we sold 216 bottles of oil or about 12 bottles per day. This was very successful as we sold a lot of oil for a good price. The major drawback is the distance to Chicago.

Goal 7: To work with two farmers to grow Omega-9 canola in 2011.

The two farmers we worked with were RJ Shooks of Shooks Farms in Central Lake, and Jim Schooley of Schooley Farm Services in Evart who both grew Omega-9 canola. RJ Shooks plans to continue growing canola on his farm. Since we had far more canola seed than we could press out, their canola along with most of ours was shipped to ADM in Windsor.

Goal 8: To develop and maintain a website to promote Omega-9 oil, inform the public of its health benefits, and provide information to farmers.

The website is www.canolaoilproducts.com . We have been getting an average of 60 to 70 visits per month. It includes a blog as well as our product information and health topics of general interest. We feel it is very successful and in 2013 plan to enhance it with full product order functionality.

Goal 9: To disseminate the information learned.

Several things have been done to educate others on what we have learned. We have used our website, fact sheets developed with MSU, newsletters and other media coverage. Detailed information on this goal can be found in the “Outreach” section.

Research results and discussion:
DISCUSSION/PROJECT IMPACTS

This grant provided us our first opportunity to develop a food product, and by doing that we added value to one of our farm products. Without the grant we likely would not have done this, or if we had it would have taken much longer. Because of the success we have had with our initial product, we are anticipating not only the expansion of that product, but also the introduction of another product. We also made a decision in mid-2012 that we would have to build our own commercial kitchen, and began to work on a project that eventually became what we call a “farm-based commercial kitchen” which will be fully licensed by the Michigan Department of Agriculture. This will allow us to continue to build our farm business and will enable us to sell our product(s) at any location we desire (web, wholesale, retail, food processor, etc.).

We learned many things during this project, including how to operate an oilseed press, how to clean canola seed, how to create a food package label, how to bottle oil, and how to develop food markets. It also helped us to form support networks that taught us so much, including the Starting Block Incubator Kitchen, other small food processors, and membership in the area food processors group which includes both large and small processors.

We made a lot of mistakes, but found that we always had a Michigan Department of Agriculture specialist, a MSU Product Center advisor, or a fellow food entrepreneur to advise us. One example is designing our label and buying 1,000 of them, only to find out that we needed a barcode on it in order to sell through retailers. In this case, an experienced food processor helped us through the process of finding barcodes, buying 10 of them, and coaching us on how to print and apply them to our canola oil bottles.

Because of our success and really good experience with this project and SARE we have shared our experience with other farmers. We believe that our process could apply to most farm products. For example, just with our product we see numerous additional value added opportunities, such as:
1) our by-product is canola meal which is high in protein and energy rich because we leave so much residual oil in it. Could it be turned into chicken feed? Fish Feed? A specialty ration for dairy calves? 2) We have a volume of biomass left from harvest like canola straw and hulls. Could this be pelleted for fuel?
3) Could Canola oil could be used as a biofuel for farmers?
4) Could Canola seed be marketed to deer hunters for their deer plots?

Each of these presents a business opportunity.

PROJECT IMPACTS
We have developed a detailed excel spreadsheet analyzing our costs and gross margins. We know that as of December 31, 2012 our financial results are:
Cost of a pint bottle of canola oil $3.66
Income if sold wholesale 5.00
Gross Profit per bottle 1.34
For 1,000 bottles $1,340

When our new farm-based commercial kitchen opens (March 2013) our financial structure is projected to look like this:
Cost of a pint bottle of canola oil $2.16
Income if sold wholesale 5.00
Gross Profit per bottle 2.84
For 1,000 bottles $2,840

Our production and financial projections look like this:
Year 2012; 2013; 2014; 2015
Pounds Processed 3,000; 12,500; 30,000; 60,000 (we grow 210,000/year)
Gallons of Oil 120; 500; 1,200; 2,400
Pints Sold 1,216; 3,800; 9,120; 18,240 (assumes 5 percent loss)
Gross Profit $1,629; $10,792; $25,900; $51,801

If we are able to meet these projections, we will need part-time help in 2014. This starts creating an impact on our community. We have talked with Township officials and while we have not shared projections this precisely with them, they are highly supportive of our efforts and see the possibilities for job and economic impacts in our community.

Participation Summary

Educational & Outreach Activities

Participation Summary:

Education/outreach description:
OUTREACH

Our most important outreach tool has been our website (www.canolaoilproducts.com). We provided all the information for the site, but hired a professional web developer to design the site, and equally important we believe, to help ensure it would show up in search engines. We receive a Google Analytics report each month which provides a breakdown of website visitors:
1) number of visits and duration,
2) keyword used by visitors,
3) pages which were visited,
4) new vs. returning visitors,
5) city and/or country visitor is from, and other information.

Our website also contains a blog which we have been using to describe what we are doing. For example, we try to keep it updated in the spring when we are planting canola with tips and techniques. As time goes on we hope to use this blog to more fully connect with other farmers as well as our customers.

One outreach tool we have developed is a “white paper” on How to Grow Spring Canola in Michigan. This is designed to cover all aspects of growing canola and should be useful to farmers in Michigan. It cross references the canola growing guide we use which was developed by North Dakota State University Extension which is named “Canola Production Field Guide”. (An excellent reference)

Included with this report are other outreach tools we have developed ourselves or with MSU. The MSU materials include:
1) Canola soil fertility plot trials,
2) Canola variety test plots,
3) 2012 Crops Comparison Budget Guide.

Materials we have developed and use are:
1) Canola FAQ,
2) Growing Canola in Northern Michigan,
3) Farmer Canola Information Sheet,
4) Making Oil in Michigan Flyer,
5) Fact Sheet on Omega 9 Canola Oil, and
6) Canola Oil Taste Test.

We have been featured in the media on several occasions, recently appearing in the MSU AgBioResearch quarterly newsletter. We have also been featured in The Starting Block newsletter “Pressing Oil with the Blackledges” and the Oceana Herald-Journal front page article on “Making Food Dreams Come True” For future educational/informational opportunities we have been asked by Greenstone Farm Credit Services to do an interview in their Regional newsletter on our canola operation, and asked by MSU Extension Biofuels and Bioproducts Group to co-sponsor a field day in Summer 2013 on canola for food and fuel.

A presentation was given at the 2014 NCR-SARE Farmers Forum, held in conjunction with the Ohio Ecological Food and Farm Association (OEFFA) Conference. A recording of this presentation is available through NCR-SARE's YouTube channel at: https://youtu.be/AuwkhkRv8K8?list=PLQLK9r1ZBhhGr9RLwfvRvJLEtHJOLdXZz

Project Outcomes

Recommendations:

Future Recommendations

EVALUATION

EVALUATION
As a grant recipient our evaluation of this program is all positive. We found the grant guidelines easy to understand and worded in such a way that we felt comfortable writing it ourselves and describing just what we wanted to do. We feel this is an excellent program that allowed us to try a business idea for our farm that we would have been hesitant to without it.

Information Products

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.