Tighter EU herbicide residue limits may rewrite flax trade

Europe’s tweaking of a maximum residue limit for a herbicide has fundamentally altered flax markets for years to come, says the president of the Flax Council of Canada.

In the summer of 2016, the European Commission tightened its tolerance level for haloxyfop to .01 parts per million from .1 parts per million.

Haloxyfop is a Dow grass herbicide that is used extensively on flax crops in Russia and Kazakhstan but is not registered in Canada.

The policy change is allowing Canada to regain some of the market share it has lost to Black Sea flax in the European Union.

“There have been around 100,000 tonnes of exports into Europe from Kazakhstan and Russia that have been rejected so far,” Don Kerr told delegates attending the Saskatchewan Flax Development Commission’s annual general meeting held during CropSphere.

That rejected flax is being rerouted to other markets. Oil World estimates China will buy 120,000 tonnes of Black Sea flax in 2016-17, up from 71,000 tonnes the previous year.

It forecasts that Turkey will buy 170,000 tonnes of Black Sea flax, up from 81,000 tonnes.

Oil World is forecasting a slight uptick in Canadian exports to the EU of 160,000 tonnes, up from 147,000 tonnes a year ago. Kerr thinks the export program will be higher than that with about 50,000 additional tonnes heading to the EU.

He believes there are sales on the books that will materialize when the St. Lawrence Seaway reopens for business in the spring.

As well, he does not believe Russia and Kazakhstan will be able to sort out the problem by next year because growers in the region have relied so heavily on haloxyfop.

“This issue is probably not going to go away, not in the near term,” Kerr said in an interview following his presentation.

The incident has opened the door for Canada to ship more flax to a market that buys about 700,000 tonnes of the crop a year.

“There is a huge potential for increase there,” he said.

Canada may lose some Chinese sales to Russia, but Kerr does not expect too big of a dent in that business because there is huge demand for flax in China, and an extra 50,000 tonnes of discounted Russian flax can easily be absorbed.

“Overall it is a net benefit to Canada because the European market is a much higher priced market,” he said. “It could prove to be very beneficial to prices going forward.”

That is especially true in a year like this when Canadian production is down 39 percent and there are quality problems with the crop.

“With better prices for flax, we might see acres come back a little bit next year,” said Kerr.

He is forecasting a 20 to 25 percent increase in flax plantings, which would be a partial recovery from the 50 percent decline last year.

The intriguing thing is what happens with Turkey. Is it a stopgap market or an emerging new outlet for flax?

“We don’t really know what is happening to that seed,” Kerr said.

“We think it is being crushed and the oil is being exported into China.”

He said market research is needed on why Turkey is suddenly buying so much flax and whether that will last.

It reminds him of how the Chinese market opened up to Canadian flax in the wake of the Triffid incident, in which an unapproved line of genetically modified flax was found in Canadian shipments to Europe.

Flax prices plummeted as a result of the incident, and China suddenly entered the market because the price was right. It has since become Canada’s top export market by a long shot.

“Turkey in the future could become a much bigger market for flax,” said Kerr.

That would be good for global flax demand, although Canada wouldn’t be able to compete with Black Sea flax in that market.

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