China holds off on imports | Strong production, slow world demand puts damper on Canadian flax prices
Flax prices are slumping as the market transitions from old crop to new crop values.
“We were paying a couple of weeks ago as high as $17 a bushel and now we’re down to $14 f.o.b. farm,” said Grant Fehr, flax-special crops manager with Keystone Grain Ltd.
Strong global production prospects and lackluster demand are suppressing new crop prices.
Fehr anticipates a huge Black Sea crop because of expanded acreage and favourable growing conditions.
“I’m hearing that we could see a crop as big as 900,000 tonnes, which is about 150,000 more than we’ve seen historically in the past year or two,” he said.
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China purchased just over 20 million tonnes of wheat, corn, barley and sorghum last year, that is well below the 60 million tonnes purchased in 2021-22.
Black Sea flax has largely replaced Canadian flax in the European Union, and it could soon be causing stiff competition in another key market.
Fehr has heard rumours that China is considering reducing or eliminating a tariff on Black Sea flax that has kept that product out of one of Canada’s top flax markets.
“It would weigh heavily on our market here right now if Eastern European flax was allowed into China,” said Fehr.
“It could happen in the next two months, it could happen in the next six months, but in this crop year it looks like.”
Will Hill, president of the Flax Council of Canada, is unaware of any published Chinese tariffs on Black Sea flax.
“I do know in the past there has been some disputes between Kazakhstan and China on various issues, flax being one of them,” he said.
“But I don’t think there’s a published tariff nor have I heard anything about any of those disputes being resolved.”
China rivals the United States as the top customer for Canadian flax, but there are no offers from Chinese buyers right now because of poor access to credit in that country.
The potential for a big Canadian flax crop is also driving down prices.
Agriculture Canada’s July 17 supply and disposition report calls for 550,000 tonnes of production, up from 489,000 tonnes last year. However, it will likely be higher than that.
Chris Beckman, the oilseed analyst who puts together the forecast, has received feedback from Saskatchewan Agriculture that has him rethinking his yield estimate.
He used trend line yields, but Saskatchewan Agriculture said it will be much higher than that, so Beckman is boosting his estimate by 10 percent.
“Talking to Saskatchewan, they figured I was low on yields. Their crop is looking pretty good this year so we should be looking at over 600,000 tonnes of production,” he said.
The extra 50,000 tonnes will boost Beckman’s export and carryout numbers.
“I don’t think that will have much of an impact on flaxseed prices,” he said.
What will impact prices is what’s shaping up to be a bumper crop of U.S. soybeans and a record or near-record Canadian canola crop.
“I think flaxseed is just going to follow the lead of soybeans and canola, so you’re probably looking at lower prices,” said Beckman.
He believes average world oilseed prices will fall by 10 to 20 percent next year. Beckman is forecasting a 10 percent decline in average flax prices in 2013-14.
“It’s quite possible prices could go lower than that rather than higher,” he said.
One bullish factor for flax markets is the decline in U.S. acres. The U.S. Department of Agriculture is forecasting 218,000 harvested acres, down 35 percent from 2012 levels.
Beckman believes yield prospects are decent for the U.S. crop, the vast majority of which is grown in North Dakota.
