Flax prices have the potential to strengthen a little in the coming year.
“I’m friendly to the flax,” said Ian Morrison, Agricore grains analysts in Winnipeg.
“Flax supply and demand looks to tighten quite a bit in the coming year.”
Flax stocks carried into the 2000-01 crop year were a record high 381,000 tonnes. That helped keep supplies high despite a 32 percent reduction in production as farmers slashed acreage.
Flax exports to the European Union have been strong this crop year, with exports in early January 67 percent ahead of the same time last year.
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Carryover into the 2001-02 crop year is expected to drop to 200,000 tonnes.
“I don’t know how much people will increase their acreage this spring, five to 10 percent maybe,” Morrison said.
Prices have fallen this winter, as have other oilseeds, and because of the usually slow export period when the St. Lawrence Seaway is frozen.
Manitoba Agriculture thinks Europe, Canada’s largest market for flax, could return as an active buyer this spring, hoping to buy before an expected strengthening of the Canadian dollar.
This could generate a spring rally.
Overall, world flaxseed production was down in 2000. It had been rising in the late 1990s, partly due to subsidies that encouraged its production in the EU and the United States. However, Argentina has almost abandoned the crop.
The EU had a particularly large crop in 1999-2000 when winter wheat land that was flooded the previous fall was seeded to flax in the spring.
This helped depress prices and encouraged reduced acreage in Canada in 2000.
The EU has recently reformed its agricultural policies affecting flax, leading to the expectation of reduced production there.
However, its crushing industry, which has increased flax processing in recent years, will still demand the oilseed.
Agriculture Canada estimates Canadian exports to the EU will increase to 700,000 tonnes in 2000-2001, up from 650,000 tonnes this year.
Errol Anderson, analyst with ProMarket, thinks Winnipeg futures prices will improve.
“We have a demand base coming into the market,” he said.
“Canadian stocks are shrinking a bit. So I think this spring we’ll see a bit of a run in flax prices once Europe comes back and the St. Lawrence is open.”
He expects a futures price of about $270 a tonne.
Morrison put his estimate of the spring futures price for new crop flax at $260-$280 a tonne.
