Imagine a crop for which inventories are at record levels and expected to get higher, and prices are forecast to drop by 15 percent in the coming year.
Going by the book, that should tell farmers to steer away from that crop.
But prairie flaxseed growers have apparently thrown away the book.
Stocks of the blue-flowered oilseed are projected to total a bin-busting 500,000 tonnes on July 31, and swell to 700,000 tonnes by the end of 2006-07.
Prices are forecast by Agriculture Canada to average $240 a tonne basis Thunder Bay ($5.25 a bushel on-farm Saskatchewan) in 2006-07, down from about $280 ($6.17) in 2005-06.
Read Also
One Beer Market Updates Day 3 – Lentils and beef
Day 3 of the One Beer Market Update at Ag in Motion 2025.
But despite those signals, it appears western Canadian farmers plan to put more acres into flaxseed this spring than any year since 1970.
Agriculture Canada projects plantings of 2.25 million acres, up about eight percent from last year and the most since 3.3 million acres were seeded in 1970.
One longtime flaxseed grower said he’s puzzled at the prospect of increased plantings this year.
“I don’t understand it myself,” said Bill Farley, adding he plans to reduce his flax acreage by at least half this year, one of his biggest reductions in 54 years of growing flax.
He added that area seed cleaners have told him they’ve never handled so much flaxseed.
“Maybe farmers see it as a cheap crop, low inputs and low risk,” he said.
Some may also seed it for rotational purposes.
Some analysts are skeptical as to whether acreage will actually increase to the extent forecast by Agriculture Canada, but they say even if it remains at last year’s level, there will be an awful lot of flax around in the coming year.
“Given a normal quality crop, with the intended acres, it means we’re going to have plenty of flax to meet all the needs of the buyers, and we’ll have a substantial surplus,” said Terry James, vice-president of grain merchandising for James Richardson International Ltd.
While some of his numbers are slightly different than Agriculture Canada’s, the bottom line is the same.
“It’s going to take a while to work through this inventory, so I don’t see much upward potential for prices.”
James expects carryout stocks at the end of 2006-07 to climb to 700,000 tonnes. That’s almost an entire crop, considering that average annual production over the past 10 years has been about 900,000 tonnes.
Ag Canada projects exports of 700,000 tonnes, although analyst Chris Beckman acknowledges that’s an optimistic forecast.
“I guess it’s something we’re hoping for, kind of a target to shoot for,” he said.
Achieving that would require a big increase in exports to Europe.
James expects exports of around 570,000 tonnes, up from 500,000 tonnes in 2005-06. He also thinks Ag Canada’s forecast of 295,000 tonnes of domestic consumption, an increase of 30 percent, is way too high.
Beckman said some farmers see flaxseed as a “casino crop,” meaning they like to have supplies on hand because every few years there is a big run-up in price.
“It’s a crop some farmers like to do a little gambling with,” he said.
James said farmers are traditionally reluctant to deliver flax at anything below $6-$6.25 a bu.
With flax priced in U.S. dollars, holding back stocks in hopes of a higher price is a bad idea, given that the greenback has fallen for most of the past year.
“It’s like having your bin full of
U.S. dollars,” he said.
