Quietly and awkwardly, flax has walked away from bulk commodity markets, something that would have surprised an earlier generation of farmers.
“You’ll notice that flax has now become a special crop (in our analysis reports) and that’s because of popular demand from our subscribers,” Informa Economics’ Chuck Penner said at a recent presentation.
It’s not just a cosmetic change. Analysts say flax growers need to understand that specialty crops aren’t the same as the undifferentiated bulk commodities such as canola and feed barley.
It’s a world where quality is king, and the difference in price between premium and bulk grade is substantial.
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“Quality matters more now than it did before,” said John Duvenaud, editor of the Wild Oats markets newsletter.
He said there is a 50 cent per bushel spread between bulk flax and human grade selected flaxseed, with bulk getting $9 per bushel and human getting $9.50.
At one time that spread was only 10 to 15 cents per bu.
However, to get that premium, growers of human grade flax must take more steps than the crop usually requires.
“It has to be GM (genetic modification) tested. It has to be top quality. It has to be good colour,” Duvenaud said.
Oat growers have become familiar with this situation. At one time almost all farmers grew oats and sold into the bulk system. However, the feed market has shrunk in recent years and the milling market has boomed.
Buyers are willing to pay substantial premiums for milling oats compared to feed grade oats, but the crop’s value falls significantly if it doesn’t meet the specifications.
Duvenaud said a feed oat market barely exists anymore, and he wonders if the problems in the industrial flax market – in which Europe has banned imports of GM-tainted flax seed – won’t break the flax market in two, with a growing but small market in human food and a shrinking bulk market.
“I’m pessimistic about flax in North America, but the human consumption market is getting better,” Duvenaud said.
Consistent growers of traditional special crops such as pulses understand the importance of matching variety to demand and taking advantage of contracts. Oat growers have become comfortable with delivery contracts in the past decade.
From now on, flax growers may need to work harder on lining up varieties and buyers before they seed because failing to break into the premium market could leave farmers holding the bag at harvest time.
