Last year’s disappointing flax harvest in Kazakhstan is sending once-lost European business back Canada’s way.
Production fell 42 percent from 2011 because of severe drought in northern Kazakhstan, where flax is grown, according to the U.S. Department of Agriculture.
The country has emerged as a major producer and exporter of flax in recent years. Its growers are capitalizing on high prices for the crop and the void in the European market caused by Canada’s Triffid incident, in which traces of an unauthorized genetically modified variety were found in shipments to Europe.
According to Oil World, Kazakhstan was the third largest exporter of flax in 2011-12, behind only Russia and Canada.
Ninety percent of its sales go to the European Union, but exports are expected to fall dramatically this year. The USDA forecasts 100,000 tonnes in 2013, which is 57 percent lower than last year’s 230,000 tonnes.
Kazakhstan’s flax stocks as of Jan. 1 were down 54 percent from the same date a year ago, the USDA said.
Grant Fehr, flax-special crops manager with Keystone Grain Ltd. in Manitoba, has heard that 600,000 tonnes of Black Sea flax are available to service the EU market when Russian and Ukrainian production is included. Last year, 750,000 tonnes were available.
It is still an ample supply, but logistical problems are preventing Black Sea exporters from consistently providing product to European buyers, which provides Canadian exporters with the opportunity to bridge the gaps.
Fehr provided a price quote to a buyer in Poland last week, which is the first time that has happened since 2010. There has also been interest from England. He isn’t sure if Canadian flax can be priced into a market that has become accustomed to cheaper Black Sea flax, but it’s nice to have another possible outlet for the crop.
However, growers shouldn’t expect a price bump resulting from Kazakhstan’s shortage, he added.
“How much higher can flax go? Guys can talk about it going to $20 a bushel like 2004, when we had the frost. I don’t see that happening,” he said.
“Nobody is going to pay that. We’re right now at the peak. If guys aren’t selling now, give your heads a shake.”
Fehr thinks the chances of flax prices falling far outweigh the odds they will rise. He believes the commodity bubble is about to burst and soybeans will fall to $12 per bu. by June.
Dave Sefton, a flax grower from Broadview, Sask., said flax competes against other oilseeds, which are having a hard time trading above their recent price ranges.
“We need to look at what canola has been doing and what soybeans are doing, and they just have a hard time breaking through that resistance level,” he said.