Last year was a difficult one for companies that depend on Canadian flax, as growers abandoned the crop in droves in favour of canola.
Flax acreage plummeted 34 percent to a 14-year low of 1.3 million acres, forcing end users to reduce their crush and increase the price they paid for the crop.
So Agriculture Canada’s first estimate of 2008-09 seeded acreage came as a relief to Detlef Volz, general manager of C. Thywissen Gmbh, Europe’s largest importer of Canadian flaxseed.
The department is forecasting a 37 percent increase to 1.8 million acres.
Read Also
USDA’s August corn yield estimates are bearish
The yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn.
“We are very much in favour of any increase in availability,” Volz said.
Prices are expected to decrease marginally but will remain well above the 10-year average.
Volz agreed with that assessment. He said flax buyers recognize they have to pay a decent premium above canola to compensate growers for lower yields and the worldwide oil fundamentals are still bullish for canola prices.
“There is not huge potential for flax (prices) to go down,” he said.
Flax Council of Canada president Barry Hall said 1.8 million acres isn’t an unreasonable estimate, but it surpasses what many in the trade were expecting. For instance, he talked to a trader last week who was anticipating a more moderate 10 percent increase in seeded acreage.
However, in today’s volatile market nobody is counting on a Jan. 30 forecast to be bang-on come spring.
Hall said growers have plenty to consider.
On the one hand, it appears farmers can make money on pretty much every crop they grow in 2008-09, which might encourage them to stick to a good rotation that includes flax. As well, the crop has lower input costs than canola.
On the other hand, canola prices keep rising, which may again lure acreage out of flax. And while canola growers can use futures markets to hedge against potential delivery problems in a rising market, flax growers have no such protection unless their contract includes an act of god clause.
Volz encouraged growers to consider another factor when weighing their planting decisions.
“We do need regular and constant supply.”
He worries flax could face the same fate as linola if Canadian growers don’t start delivering a more reliable supply.
C. Thywissen used to be the sole buyer of Canadian linola, a mutant strain of flax that produced an edible linseed oil with low linolenic and high linoleic acid profiles.
The company processed the crop and sold the oil to a large food company that used it to produce a high-end margarine. When Canadian farmers held out for higher prices, the customer found an alternative ingredient.
“We will not gain that (business) back. It’s dead,” Volz said.
He worries the linoleum industry may come up with a similarly innovative alternative to flax oil if the current supply problems persist.
Despite the 36 percent increase in production forecast by Agriculture Canada, supply will likely still be an issue in 2008-09 because the department is forecasting total supplies will drop slightly from last year due to extremely low carry-in stocks. Exports are forecast to fall by 50,000 tonnes.
As a long-term fix to the ongoing problem, Volz encouraged the Canadian flax industry to pour more resources into breeding programs to boost lackluster flax yields.
Hall said the industry is attempting to raise more money for breeding programs and believes that through a combination of breeding and agronomic advancements, yields could be doubled over the next 10 years.
However, he said part of the blame lies with end users such as C. Thywissen that are reluctant to embrace biotechnological advancements.
“We were in Europe a year ago talking to these very people. That was one of the questions (we asked) and they were very much fearful of that being introduced. It’s a catch-22 situation.”
Hall said Volz’s concerns about erratic supplies are valid, but he downplayed the threat of the flax market disappearing if those needs are not addressed. He said there are few if any substitutes for many flax oil applications and in today’s booming commodity markets there is little in the way of cheap oil substitutes.
That said, he agreed attempts need to be made to boost yield. One simple thing growers can do is pay more attention to existing agronomic advice.
“Flax has become the Rodney Dangerfield of crops because it gets no respect.”
A surprising number of producers seed flax after their canola seed goes in the ground, which is agronomically foolish.
