Recovering from downturn | Flax council president says group may consider lower levy
The Flax Council of Canada is on better financial footing thanks to a levy increase and a rebound in acres.
Acres plummeted after the 2009 discovery of an unwanted GM flax variety in the seed supply decimated sales to Europe.
A market that accounted for two-thirds of Canadian flax exports before the discovery of CDC Triffid is now consuming about one-quarter of what Canada ships.
The crop peaked at two million acres in 2006 but plummeted to 740,000 acres in 2011. That had major ramifications for the council’s annual budget.
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The national commodity group is funded by a levy collected from North American crushers and Canadian processors and exporters.
The council doubled the levy to $2 per tonne effective April 1, 2012, to help offset plunging flax production in the post-Triffid era.
Its annual operating revenues of about $750,000 had been halved.
“That was just to survive. If we didn’t have this money, we would have been in big trouble,” said president Don Kerr.
The levy hike has improved the council’s finances, as has the rebound in acres. Growers planted 1.56 million acres this year, which is the most since they seeded 1.69 million acres in 2009, the year of the Triffid incident.
More acres means more production, which means more levy revenue.
Kerr said the financial picture has improved to the point where the council is considering gradually reducing the levy back to $1 per tonne.
That topic will be discussed during the next couple of board meetings. The council is also considering revamping its $200 annual membership by creating three or four levels of contribution depending on the size of the contributing company.
The levy paid by crushers, processors and exporters is voluntary, and there is a 60 percent compliance rate.
“We’re going to try to get that compliance rate up. That’s one of my jobs,” Kerr told Agri-Trend’s 2014 Farm Forum Event.
The council needs levy revenue to fund research projects. The only way to get federal government support these days is for a commodity group to provide half the funding.
“Otherwise you don’t even get to first base with an application,” said Kerr.
He plans to publish a list of levy contributors on the council’s new web page within a couple of months to boost compliance rates.
He will also encourage growers to do business with the 60 percent who are paying the levy.
“These companies that are paying the levy are the companies that are allowing us to pursue these programs and if you’re not paying the levy, you’re not buying into that,” said Kerr.
The council’s finances may have improved, but there are still threats on the horizon.
Archer Daniels Midland, a U.S. customer that accounts for 28 percent of Canada’s flax exports, recently bought 25,000 tonnes of flax from Kazakhstan rather than Canada.
It is cheaper for the flax to travel by rail across Russia to a port in the Baltic Sea, by boat across the North Atlantic Ocean to the Gulf of Mexico and by barge up the Mississippi River to ADM’s plant in Minneapolis than it is to ship it from Canada because of North America’s rail logistics problems.
It means the council just lost $50,000 in much needed levy revenue because ADM is a faithful levy contributor.
sean.pratt@producer.com
