For the third year in a row, flax prices will decline next year, say market analysts.
But for the third year in a row, that won’t deter prairie farmers from planting more of the blue-petaled oilseed.
Why grow more of a crop that’s going to be worth less? For flax growers like Garvin Hanley, it’s all relative.
“You have to ask, compared to what?” he said in an interview from his farm near Regina last week. “What else is there to seed? And it’s still a decent paying crop and a cash crop.”
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Most farmers have had positive experiences with flax the last couple of years, he said, with good yields and good prices, so they’re fairly enthusiastic about it.
“There’s no doubt acres will be up some,” he said. “How much depends on price movement over the next couple of months.”
Even if the price drops, flax remains a low-cost crop that many producers like to put in the bins and wait for a rally.
“It might be their gambling crop,” said Chris Beckman, oilseed analyst for Agriculture Canada. “Even though the price may be low now, they might plant it and store it until prices jump up again.
Analysts have been projecting anywhere from a five to 10 percent increase in flaxseed acreage this spring, although recent weakness in world oilseed markets has led to some second thoughts.
As 1998 drew to a close, oilseeds stood out as much more attractive than cereals, but in the last month the oilseed market has declined by $30 to $40 a tonne, said Greg Kostal of Profarmer Canada.
“If planting was to occur today, there really is not a significant difference between cereals and oilseeds, so that’s kind of leaving the acreage equation up in the air right now,” he said.
The world oilseed complex has been driven down by higher palm oil production, increased oilseed production in South America, record sunflower crops and expectations of increased production of canola and soybeans in the coming year.
“The whole oilseed market has come under pressure and linoil has no choice but to fall,” said Kostal.
The flax market always goes into the doldrums after the St. Lawrence Seaway closes for the winter, since most exports go to Europe. The price usually moves up once the export program starts again.
Kostal said he expects that spring rally will be enough to produce about a 10 percent increase in acreage, with prices likely in the $6 to $7 a bushel range (basis Manitoba).
Hanley said the break-even price for most producers is probably around $6.50, depending on the amount of inputs.
Agriculture Canada’s Dec. 22 supply and demand analysis for flaxseed projected a three percent increase in acreage, an eight percent increase in production, a 14 percent increase in total supply, a 13 percent increase in exports and a 44 percent increase in ending stocks. The department is projecting a price decline of seven or eight percent.
An updated report will be released in a couple of weeks, said Beckman, adding that some fundamentals have changed since the December report was put together. For example, a USDA forecast of lower soybean prices will pressure flaxseed prices and could cause some producers to rethink their seeding intentions.
