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Tight supply boosts prospects for flax market

There are reports that the crop yields in the Black Sea region may be in trouble, particularly Russia and Kazakhstan

A small Canadian carryout combined with production problems in the Black Sea region bodes well for the flax market, say analysts.

“You’ve got snug supplies so to me flax can maintain an elite pricing structure for the year,” said Greg Kostal, analyst with Kostal Ag Consulting.

It is difficult to ascertain production information out of the Black Sea region in a typical year let alone a year where COVID-19 is preventing Canadian firms from travelling to Russia and Kazakhstan to check on crops.

But there are reports filtering out that the flax crop in that region of the world is in trouble.

Brian Johnson, general manager of commodities with Johnson Seeds, a flax and special crop processor in Arborg, Man., has heard reports that plantings were up somewhere between 500,000 and 750,000 acres.

He doesn’t doubt that because prices were strong during spring planting. However, there is mounting concern about yields in the region.

“The Russian crop for sure is not good,” he said.

Johnson is not sure about Kazakhstan’s crop, but Rayglen Commodities shared some thoughts about that country’s prospects in a Sept. 2 market comments report.

“Drought looks to have caused some issues in Kazakh yields. How much is yet to be determined,” stated the report.

“Overall, exports are tight right now and pricing seems to be a direct beneficiary.”

Kostal said European buyers have been knocking on Canada’s door early in the new crop year, which is unusual because they typically rely on Black Sea supplies at this time of the year.

“It speaks to deferred/delayed/reduced availability of Black Sea (flax), so that’s your actual evidence,” he said.

Canadian farmers are harvesting what appears to be a bigger and better quality flax crop than last year.

Statistics Canada forecasts 553,000 tonnes, a 14 percent increase. That is based on average yields of 25 bushels per acre.

But carryout from the 2019-20 crop is pegged at 70,000 tonnes and much of that is poor quality flax.

“You’re basically rock bottom. You’re not going to get into a supply-push pricing environment,” said Kostal.

Johnson said there is no reason to dispute Statistics Canada’s production estimate. He has spoken to farmers who are getting yields in the 27 to 28 bushel per acre range. Some Manitoba growers who planted early are seeing 35-plus bu. per acre.

Crop development was a concern in Saskatchewan but an August heat wave took care of that.

As long as the good weather continues, he agrees that production will top last year’s 486,000 tonnes.

October snowfall damaged last year’s crop resulting in poor quality. He believes much of the 70,000 tonnes of carryout from the 2019-20 harvest is in bad condition.

“This year, the chances of having good quality are much better,” said Johnson.

“We have seen samples and it’s very, very good. It’s top notch.”

New crop flax prices are holding up nicely in the $13 to $13.75 per bu. range delivered to the elevator.

He said it is hard to gauge demand at this point in the year but there is nothing to suggest it will be much different than normal despite COVID-19.

“All I can say is the prices in Western Canada are good right now. Are they going to remain that way? I just don’t know,” said Johnson.

Brennan Turner, chief executive officer of FarmLead, seems to think prices will hold up.

“I’m optimistic that with some continued strong global demand for the oilseed, flax prices should continue to stay elevated relative to the past few years,” he wrote in a recent newsletter.

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