Market analyst Larry Weber is high on flax.
“I believe flax has the best potential to be the next Cinderella crop in Western Canada,” the Saskatoon commodity analyst told the Saskatchewan Flax Development Commission annual meeting Jan. 7, part of Crop Production Show week in Saskatoon.
The analyst forecast prices in the coming year of $15 to $20 per bushel with normal to good weather, but more than $20 if conditions are dry.
Last year prairie farmers seeded 1.3 million acres of flax, well below the 10 year average for the region.
Read Also
Outdoor farm show a trade supercharger
Canadian Chief Trade Commissioner Sara Wilshaw says international buyers love the chance to see farm equipment in the field in Saskatchewan.
“We produced just over 600,000 tonnes of flax last year.”
Production in other regions also dropped.
The European Union has tumbled to less than 100,000 acres because of lack of subsidy and the rise of biodiesel.
China no longer seeds the acres it once did and produced about 450,000 tonnes.
“We own this market,” he said.
Only 900,000 tonnes of flax trades across international borders, with a total of 2.2 million tonnes being crushed worldwide.
Grain prices will be high this coming year, providing strong competition for acreage this spring, said Weber. He believes the market is in a multiyear-high phase.
“When will this end? When should I sell my farm? Maybe 15, maybe 20 years this (high grain price trend) will run. I am seeing reinvestment in farm equity for the first time in my career,” said Weber.
In 2008, flax acreage will likely climb, although it will also face strong competition from canola.
Based on average yields of 18 bu. per acre for flax and 27 bu. for canola, flax prices would have to be at $19 per bu. to produce as much revenue per acre as canola at current 2008 bids of $11.37 per bu.
That will be a moderating influence on flax acreage, meaning farmers are unlikely to seed so much that it will flood the market and kill prices.
“You growers will kill this market (by overproducing), but not this year. We’ll wait and do it next year or the year after, but it will happen,” he said.
Weber expects flax area to climb to 2.2 million acres in 2008, particularly if the moisture situation in southern Saskatchewan improves.
“Any time we get over $12 (per bu.) we will add at least 600,000 acres.”
His price forecast for 2008-09 is for $15 to $20 per bu. if snow and rain fall in southern Saskatchewan, but much higher if it is dry.
“I don’t think $20 will do it if it doesn’t rain,” said Weber.
In addition to supply and demand, transportation is a factor in prices.
“I used to say, sell in early December and late February based on navigation closing and opening on the Great Lakes. But actually, the time (to sell) is April and October for best prices.”
Flax prices in Canada are high, but the imported product in Europe is at a record.
Ocean freight is up threefold in three years. With $100 per tonne costs for shipping and a strong Canadian dollar, the EU is paying record high prices of $750 per tonne for landed product, he said.
Weber believes containers may become a regular transportation system for grain, just to get space on a ship.
“But last week you couldn’t book a container out of Saskatoon because there are not enough vessels to handle what is there,” he said.
The market for flax is changing as its healthful properties become better known.
“We have 50 years of thinking about flax as being marketed in a can of paint, not in little bottles in a drug store. We need to think different to create a market we can’t kill,” said Weber.
“I think we are still missing out on the nutraceutical markets for flax. It is undermarketed for its health value. It has higher levels of omega 3 and 6 (fatty acid content). Better than any other grain.”
