Flax industry observers believe farmers will plant fewer acres this spring but it won’t be enough of a decline to spark a price rally.
They disagree with Agriculture Canada’s forecast calling for 1.73 million acres of the oilseed, a five percent increase over the 2015 crop.
“I know the pedigreed seed sales are a little bit slower than they have been the last few years and there is some inventory left on farms,” said Shane Stokke, owner of Stokke Seeds, a processing plant in Watrous, Sask.
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“I think the flax acres will probably go down (but) I don’t think they’ll drop out of sight.”
He is forecasting 1.2 to 1.4 million acres of the crop.
Chuck Penner, analyst with LeftField Commodity Research, said when he pencils out crop budgets for 2016-17 flax doesn’t perform well compared to other crops.
“I’m kind of the mindset that we’ll probably see acres go down a little bit,” he said.
A lot of flax is grown in south-central Saskatchewan where it will face stiff competition from lentils.
Despite the prospects of a smaller flax crop going in the ground this spring Penner is not optimistic about the price outlook.
Exports have been lackluster. He believes they will fall 100,000 tonnes short of Agriculture Canada’s 700,000 tonne estimate.
“There is a record crop in Kazakhstan and Russia, so that is taking up more of the European market,” said Penner.
He has seen reports that the Black Sea region produced 1.1 million tonnes of the oilseed in 2015, which is more than Canada produced last year.
There was also a big crop in the United States where growers planted 463,000 acres, up 49 percent from the previous year.
Penner said the flax market is a three-legged stool, with China, the European Union and the United States forming the three legs.
All three of those legs have been wobbly in 2015-16 with Black Sea flax displacing Canadian flax in Europe, a big U.S. crop limiting sales south of the border and lower shipments to China.
That means carryout is going to be a lot higher than Agriculture Canada’s 130,000 tonne estimate, perhaps 230,000 tonnes or more, said Penner.
“I’m not real friendly towards the flax market. Prices have already started to go down,” he said.
The recent strengthening of the Canadian dollar versus the U.S. dollar isn’t helping matters.
He believes there will be further downward pressure on flax prices because farmers in Kazakhstan and Russia are not receiving the market signal to plant less flax because they have been insulated by weak currencies.
“I’m hoping we can stay above $10 (per bushel). That might be the saw off point where farmers lock their bins,” said Penner.
Stokke expects prices to stay in the $10 to $11 per bushel range as long as the U.S. dollar remains strong compared to the Canadian dollar.
He is paying growers $10.50 to $11 for good quality flax suitable for milling.
But he agreed with Penner that there is a greater likelihood of flax prices falling than strengthening due to ample global supplies of the crop.
Stokke said in eight out of every 10 years flax prices tend to run up in the spring but he’s not sure that will happen this spring.
If prices do jump by 25 to 50 cents a bushel he believes that will be sufficient to shake loose a lot of the 2015 crop that has been locked away in bins.
Stokke believes much of that flax would grade No. 1 CW but it doesn’t have the “pristine uniform flax colour” required for the food market.
sean.pratt@producer.com
