Flax seems like a good crop to grow this summer.
But it’s difficult to tell, because the otherwise healthy industry is struggling with a marketing illness.
Demand seems good, but the absence of a functioning futures market means farmers have to plant the crop without being able to easily hedge their price risk.
“With new crop, it’s hard to tell,” said Arborg, Man., flax marketer Brian Johnson. “Overall, demand should be good.”
Flax can be used both for industrial purposes like making paint and for health food products for humans and animals.
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Farm marketing adviser John Duvenaud of Wild Oats Market Advisory newsletter said fundamental shifts in demand have shaken up flax marketing, while leaving it with a good demand.
“It’s not a 50,000 tonne load going to Rotterdam as much as it is two containers going to Guadalajara,” said Duvenaud, describing the shift.
“There are all sorts of containers going out one or two at a time.”
Unfortunately for flax, synthetic products have knocked it out of many of its old industrial markets, although some linoleum and paint producers still use it. But as industrial demand has weakened, health food demand has expanded.
Flax is now sold in grocery stores in oil and ground seed forms for people. It is also sold to chicken farmers in order to produce “healthy” eggs, and to dog food processors who want to include its fatty acids in premium products.
Europe still provides a stable market for industrial flax, said Bevyn Litke of Agricore United.
Statistics Canada estimates that Canadian producers will increase their flax acreage a bit this year.
Litke said flax is still popular with farmers.
“It works well in growers’ rotations and it’s a fairly easy crop to grow,” said Litke.
Johnson said he misses the flax futures market because it offered a quick, easy and cheap way for him to hedge his risk.
Now that the flax contract isn’t trading, some buyers and sellers of flax have moved to a contract system using deferred delivery contracts. It isn’t as convenient, but “we’ve had to make it work,” said Johnson.
“It’s changed the way we do business. We certainly miss having the futures.”
The Winnipeg Commodity Exchange has not delisted the flax contract and plans to speak to the flax industry about a redesign to make it work.
