Kazakhstan’s rise hits Canadian flax

Canada sold 67,000 tonnes to China in first two-thirds of 2019-20 compared to 268,000 tonnes in all of previous year

Kazakhstan continues to usurp Canada’s flax markets, say analysts.

APK-Inform estimates that the country’s seeded area will reach 3.33 million acres this year, up 13 percent from the year before.

Production is forecast to exceed one million tonnes, a 22 percent increase.

By contrast, Statistics Canada is forecasting flat plantings in Canada, at about 941,000 acres, and an estimated 530,000 tonnes of production.

Neil Townsend, chief market analyst with FarmLink Marketing Solutions, thinks that is optimistic. He is forecasting a 10 percent reduction in acres.

“Flax has got lots of headwinds. There is too much of it and not enough demand,” he said.

Exports through the first eight months of 2019-20 are down about 100,000 tonnes versus a year ago.

Despite the reduced acreage he expects supply to rise in 2020-21 due to a big carryover.

“We’re going to end up with burdensome stocks again,” said Townsend.

Canada’s woes are due in a large part to the continued ascension of Black Sea flax in markets such as the European Union and now in China.

“The (tightening) relationship between China and Kazakhstan is a particular threat for that market for Canada,” said Townsend.

Canada sold 67,000 tonnes of flax to China during the first two-thirds of 2019-20 compared to 268,000 tonnes all of the previous year. Prior to that, volumes had been exceeding 300,000 tonnes per year.

“Essentially, we’ve lost the Chinese market,” said Townsend.

Myles Hamilton, president of CanMar foods, has seen a forecast calling for global flax consumption to increase at a rate of 10.8 percent per year through 2024, so it’s not all doom and gloom for the industry.

However, he acknowledged that Kazakhstan appears to be eating Canada’s lunch in overseas markets.

Demand has been strong in his segment of the business. CanMar cleans, roasts and bags of organic golden flax for grocery store chains and club stores in Canada and the United States.

The company experienced double-digit sales growth in 2019 and then things really took off in March-April 2020 as COVID-19 forced people to dine at home.

“We’ve seen substantial growth in that period, in the 40 to 50 percent range with the grocery customers,” said Hamilton.

CanMar is promoting the product as a breakfast ingredient to be used in yogurt, smoothies and cereals. However, it is also used in baking, and people are doing more of that these days.

He estimates about 75,000 acres of Canada’s flax is used for food consumption. Much of the remainder is exported to markets such as China and the European Union to be crushed and sold as industrial oil.

Hamilton has noticed that Viterra recently increased its prices to a two-year high, indicating that acres might not be where exporters want them to be.

“The pricing has moved up for a reason,” he said.

He estimated that about 150,000 acres of last year’s crop was harvested this spring and it was of poor quality. Most of it will be destined for the feed market, so exporters might be short of good quality exportable supplies.

Rayglen Commodities said flax prices range from $14 to $16 per bushel, and those prices are likely to stay firm until new crop comes off.

“One of the key factors in our prices holding is that U.S. crushers are short supplies on both sides of the border,” the firm stated in a recent market report.

The U.S. Department of Agriculture is forecasting 270,000 acres in that country, down from 374,000 acres a year ago.

“Issues with decent supplies of quality flax available suggest short supply down south likely won’t be resolved until the 2020 crops is off,” the brokerage firm said.

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