Flax price should empty bins: analyst

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Published: October 25, 2007

Allen Kuhlmann can hardly believe it.

The long-time flaxseed grower from Vanguard, Sask., is witnessing the highest flax prices he’s ever seen.

“They’re very attractive and they seem to have been getting more attractive every day,” he said.

Saskatchewan elevator prices are in the range of $500 a tonne ($12 to $13 a bushel) with some trackside loading facilities paying more than $550 a tonne. The two previous crop years, prices averaged around $250 a tonne.

Given the relatively low production costs associated with flax, those prices pencil out to excellent net revenue per acre.

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“Some people seem to like to store flax, but I can’t imagine anyone not selling at the prices we’re seeing now,” said Kuhlmann. “These are historically high prices. Sure, it might go higher, but there’s another direction it might go too.”

The high prices are a reflection of two factors.

After a couple of years of low prices, producers shied away from flaxseed last spring. Seeded acreage fell by 33 percent as producers opted for other crops that seemed to hold the prospect of better returns. As a result, production dipped by 27 percent to 625,000 tonnes.

Demand sparks rally

At the same time, strong demand in Europe for all oilseeds, including flaxseed and flaxseed oil, has pushed prices up sharply in the last six weeks.

“The market started kind of slowly this year but in the last five or six weeks there has been a real rally,” said Chris Beckman, market analyst with Agriculture Canada. “It would probably be a good idea for farmers to take advantage of these prices.”

Prices in Europe, the major buyer of flax from Canada, have been as high as $640 a tonne ($16.25 a bushel) for delivery this fall.

Kuhlmann said that differential has raised concerns among Canadian producers as to why the price here is lagging.

Most years, flax prices are strongest in the fall, when demand is strong from shippers anxious to get product shipped out of Thunder Bay, Ont., before freeze-up, then go into the doldrums in the winter.

Kuhlmann, who serves as chair of the Saskatchewan Flax Development Commission, said that may not be the case this year.

“The people who need flax are going to have to be competitive with other crops to make sure more flax is planted because I’m sure those folks don’t want to be paying $14 again,” he said.

A considerable amount of flax has yet to be harvested, which could affect the final production figure, although it generally holds its quality well through inclement weather.

Oil content is expected to be down a little, and yields suffered due to hot dry weather in July.

As for the supply and disposition of this year’s crop, Agriculture Canada forecasts a slight decline in exports to 650,000 tonnes and a 34 percent decline in domestic consumption to 183,000 tonnes.

Beckman cautioned not to read too much into the decline. Actual purchases of flax for food and industrial purposes are expected to remain unchanged.

The decline reflects a reduction of some 100,000 tonnes in the category feed, waste and dockage, due to a recalculation of data by Statistics Canada.

“The lower number reflects a statistical anomaly rather than any real change in the industry,” he said.

Carryout stocks are expected to plunge by 53 percent to 175,000 tonnes, producing a relatively neutral stocks-to-use ratio of 21 percent. The previous year’s carryout stock of 373,000 tonnes represented a market-depressing ratio of 40 percent.

About the author

Adrian Ewins

Saskatoon newsroom

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