A leading international oilseed analyst is shedding some light on why Canadian flax prices are approaching record levels.
Some Canadian analysts are speculating that the strong prices are the result of either a Black Sea crop failure or logistical problems in that region of the world.
“The disruption of the flax supply in the Black Sea region has the prices for Canadian flax at an all-time high,” Rayglen Commodities said in a recent market commentary.
“If the disruptions overseas are purely logistical then we will see a correction in the market.”
Siegfried Falk, co-editor of Oil World, said there were no production problems in the Black Sea and they are not having problems moving the crop.
Oil World estimates that Russia and Kazakhstan produced a record 1.8 to 1.9 million tonnes of flax, a sizable increase over the previous year.
However, Chinese demand for flax and flax oil continues to grow and is largely being satisfied by those two Black Sea countries.
“On top of that, there is growing demand for linseed from the crush industries in Russia and Kazakhstan,” he said in an email.
“These developments are curtailing linseed export supplies from Russia/Kazakhstan to the European Union, which in turn stepped up purchases from Canada.”
Not that long ago Canada lost much of the EU market to Black Sea exporters but it appears to be regaining market share in that region, according to Oil World’s observations.
Flax production increased in the EU in 2020 with farmers harvesting an estimated 140,000 tonnes. But that is “highly insufficient” to cover the demand from EU processors.
“Canadian linseed exports to the EU increased in recent months and we expect this uptrend to continue in 2020-21,” said Falk.
Statistics Canada’s early-season export data presents a different picture.
The statistics show China was the top market for Canadian flax in August, accounting for about one-quarter of what was shipped that month.
The United States was the top destination in September, taking about two-thirds of what was exported.
Germany is the first EU country on the list, appearing at the number nine spot in September.
There is no detailed export data yet for October and November. Perhaps the EU took more product in those two months.
The Canadian Grain Commission has more current weekly data for bulk exports but it is not broken out by country.
It shows that exporters have shipped out 194,900 tonnes of bulk flax through week 16 of the shipping season, which is more than double the same time last year.
Sales from Canada’s Black Sea competitors have been brisk as well.
APK-Inform reports that Russia shipped out 300,000 tonnes of the oilseed between July 1 and Nov. 24, a 23 percent increase over last year.
UkrAgroConsult reports that Kazakhstan shipped a record 28,500 tonnes of flax in September, more than double the volumes of one year ago.
Allan Johnston, a grain broker with Johnston’s Grain in Welwyn, Sask., said demand from the grain companies has been strong this year.
“We’ve been moving a lot of stuff,” he said.
Farmers can get $18 per bushel for deferred delivery or $17 to $17.50 if they would like to move their flax earlier.
Johnston doesn’t have any inside track on why global demand has been so strong this year but after 50 years in the business he has an educated guess.
“Countries around the world are nervous,” he said.
COVID-19 poses a big threat to politicians because it has already shown that it can quickly disrupt supply chains.
“If they don’t provide their people with food, guess what happens? Somebody gets kicked out,” said Johnston.
He said grain companies are already starting to contract new crop flax. He just booked six loads with an area farmer at $14.50 per bu. picked up at his yard.
Prices are lower than they are for old crop flax but farmers are still finding them attractive, he said.