Low flax supply may hike price

A Canadian flax buyer expects 2013-14 carryout to be half as much as Agriculture Canada is forecasting.

Grant Fehr, flaxseed position manager with Legumex Walker Inc., said North American production was low and demand has been strong.

Sales to the United States will exceed 200,000 tonnes, China is expected to buy another 200,000 tonnes, and then there is the return of a familiar customer.

“We’re going to see 200,000 tonnes moving to Europe,” he said.

It would be the largest sales program to the European Union since the 2009 Triffid scare, when an unapproved GM variety was found in Canadian flax shipments to Europe and shut down trade to the region.

The Black Sea region had a disappointing crop, some of which is just now being harvested.

Most of the Black Sea crop will be sold to India, Eastern Europe and Belgium, leaving Canada and others to fill the void in Western Europe.

There has been a softening in Europe’s attitude toward Canadian flax.

“The stigma of Triffid is waning, although for the food market it’s not yet,” said Fehr.

The upshot is that Canada will have a strong 2013-14 sales program, which should chew away at the estimated 760,000 tonnes of Canadian total supply.

Fehr thinks 160,000 tonnes will be left, some of which will be used as seed for the 2014 crop.

“We’ll have a carryout between 80,000 and 100,000 tonnes,” he said.

That’s a far cry from the 160,000 tonnes forecast by Agriculture Canada.

“It’s going to get relatively tight.”

As a result, he expects the oilseed will be a popular choice with farmers this year, forecasting 1.5 to 1.75 million acres. That is a lot more than the 1.24 million acres Agriculture Canada is projecting.

Statistics Canada is scheduled to release its seeding intentions survey April 24.

“Flax has a good return on investment compared to a lot of other crops,” said Fehr.

“It’s a good alternative at a lower risk than let’s say canola or even wheat.”

Flax typically fetches a $2 per bushel premium over canola. It wasn’t around for much of the winter but is starting to reappear.

Legumex Walker was paying $14 per bu. for old crop and $12 for new crop flax earlier this week. Fehr expects those prices to converge in the coming months.

“I think it’s going to converge closer to the new crop level than it will to the old crop level,” he said.

A lot depends on what happens to soybean prices. Soybeans have been on a bit of a bull run, but Fehr expects prices to drop as U.S. farmers begin planting this year’s crop.

U.S. growers are expected to plant 326,000 acres of flax, which is up 80 percent from last year but slightly below 2012 levels. Last year was an anomaly because many growers couldn’t plant flax due to the wet spring.

U.S. flax prices have been a lot higher than Canadian prices since last fall’s harvest.

“They’ve just had some good demand and an empty pipeline and they’ve been just trying to fill it up,” said Fehr.

He expected brown flax prices to remain stable for the rest of this year unless soybean markets go topsy-turvy.

There could be some good pricing opportunities for organic and golden flax, but seed for planting will be hard to come by for those two types.