Russia is a strong contender in the flax market and Canadian industry officials are seeing their exports fall
Canada has not recaptured the European flax market this year as some had predicted.
In fact, sales to the EU are down 19 percent so far compared to the previous year, according to Canadian Grain Commission statistics.
The belief was that exports to the EU would rise after the European Commission tightened its tolerance level for haloxyfop to .01 parts per million from .1 ppm in the summer of 2016.
Haloxyfop is a Dow grass herbicide that is used extensively on flax crops in Russia and Kazakhstan but is not registered in Canada.
Black Sea flax made huge inroads in the EU following the 2009 Triffid incident, in which trace amounts of an unapproved line of genetically modified flax were discovered in shipments from Canada.
Flax industry officials thought the haloxyfop incident would help Canada win back some of the lost market share, but that doesn’t appear to be the case.
“We were expecting to see a little more activity than we’re seeing,” said Don Kerr, president of the Flax Council of Canada.
“It’s a bit of a disappointment that we didn’t see more activity that way.”
Meanwhile, Russia is exporting a record amount of the crop, including to the EU.
The country shipped 514,700 tonnes of the crop between September 2016 and April 2017. That is a 47 percent increase over the same period a year ago, according to APK Inform-Agency, an agribusiness consulting firm operating in the Black Sea region.
Turkey was the top market for Russian flax, accounting for 38 percent of exports followed by Belgium at 32 percent and Latvia at 13 percent.
Kerr said Russian flax that has been rejected by the EU is making its way to Turkey, where it is being crushed. The flax oil is then being shipped all over the world, including back to the EU.
“That might be the reason why we haven’t seen such an increase in Canadian shipments,” he said.
Chuck Penner, analyst with LeftField Commodity Research, speculated that another reason is that a lot more Russian flax than originally anticipated is testing negative for haloxyfop, meaning it meets the EU standard, keeping the door open to trade with the EU.
“Some Russian flax is still flowing in there,” he said.
Canada’s export program is down 31,800 tonnes from the previous year because of slumping sales to the EU, China and the United States.
However, Canadian production was down 363,000 tonnes, so 2016-17 carryout should shrink. LeftField expects it to fall to 103,000 tonnes from 274,000 tonnes a year ago.
The outlook for the coming year depends a lot on what happens with seeded acres. Statistics Canada is forecasting 1.11 million acres, a 19 percent increase from last year.
LeftField is forecasting a smaller total supply than last year and 64,000 tonnes of 2017-18 ending stocks, which would be the smallest carryout since 2005.
“That should be friendly for the market,” said Penner.
He anticipates U.S. demand should rebound. The U.S. is slowly working its way through a glut of supply from its 2015 crop. U.S. farmers intend to plant 313,000 acres of flax, a 16 percent decrease from the previous year.
Chinese flax demand has been growing by 100,000 tonnes a year.
“I don’t know that we can keep that trajectory going, but it certainly points to at least stable to larger demand again in 2017-18,” said Penner.
Early indications are that Russia and Kazakhstan will plant less flax than last year, and it is unlikely they will have a second consecutive year of record yields.
“Even if they come back to just an average yield, we’ll see smaller crops,” he said.