16/1/07 (soyatech.com) WINNIPEG (Resource News International via COMTEX) -- Canola oil (rapeseed oil) has been one of the winners of the growing international demand for oils and fats, said analyst Thomas Mielke of Oil World in a presentation at Brandon Manitoba's Ag Days, Jan. 16, 2007.

However, Mielke said canola oil could be reaching a peak in terms of price, and he expected to see a narrowing of the spreads between canola oil and other vegetable oils over the next few years.

The global production of oils and fats has nearly doubled, to 154 million metric tons, over the past 15 years, said Mielke.

He said the pace of the growth is increasing, as renewable fuels are becoming a larger and larger industry.

Mielke noted that canola seed is well suited to the growing demand for vegetable oils, as it has a high oil content.

However, palm oil represents a large threat to canola's market share, as once palm oil trees are in production, they stay in production for 20 years, he added.

Prices for canola oil on the international markets have risen to US$850 per metric ton in recent years, making it one of the highest priced vegetable oils. While he thought there could be some more upside for canola oil, he added that the market may be reaching its ceiling, which will cause the spread to tighten between canola oil and other alternatives.

Palm oil could be a particularly major competitor, as the crop has considerably lower production costs, said Mielke.

He also pointed out that palm oil accounts for about 4.6% of the world's oilseed area, but 34% of the oil.