Flax has the potential to grease more than just European industrial processes in the next couple of years. It may also grease the palms of a few prairie farmers.
Since February 2000, the oilseed has seen a steady rise in price to $440 per tonne from $225 per tonne. Industry analysts say the average price for the current crop is expected to range between $410 and $440.
Larry Weber of Weber Commodities in Saskatoon said flax could be a “profitable crop for a lot of producers next year.”
Demand by European manufacturers remains strong, even as their domestic production drops slightly.
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Weber said he expects to see lower American flax production in 2003 because of a subsidy change.
“They have changed their (subsidized production) rates and this means (U.S.) farmers will shy away from flax, as they can farm that system more effectively using other crops,” Weber said.
“This could be a very good year to be a flax grower. Today a farmer could lock in new crop flax at $9.25 (per bushel) with a contract. Compared to canola at $8.50, that isn’t too bad, especially for growers in southeastern Saskatchewan and southwestern Manitoba, where canola (growing) conditions aren’t always favourable.”
With average exports of 600,000 tonnes, Western Canada is the biggest player in a 774,000 tonne world flax trade.
Total world flax production is about two million tonnes.
The Canadian 2002-03 crop was down about 36,000 tonnes from the year before, according to Agriculture Canada’s Jan. 10 grains and oilseeds outlook report.
Weather conditions resulted in poor yields across the Prairies and 337,000 acres of flax remain unharvested. Crop conditions are variable.
Carryout for 2002-03 is estimated at 170,000 tonnes, down by 70,000 tonnes from the year before.
These factors have combined to push prices higher.
Stan Spak, an oilseed analyst with Agriculture Canada, said he expects producers to increase flax plantings to 1.8 million acres in 2003 from about 1.7 million in 2001 and 2002.
“Conditions look about average in the region and prices are good, so if all of the factors remain stable we should see farmers increasing their flax acres,” he said.
Spak said better moisture conditions in Saskatchewan and Manitoba have improved flax’s prospects.
“Small-seeded crops like flax don’t do well in a drought,” he said.
“Dry spring conditions will sink a crop, but in some of the flax-growing areas things are looking not too bad.”
Canadian production in 2001 and 2002 averaged nearly 700,000 tonnes. For 2003, Agriculture Canada is forecasting production of almost 900,000 tonnes.
Canada’s 10-year flax production average is 660,000 tonnes.
“If we see the 890,000 tonnes (of production in 2003) then it is likely that there will be downward pressure on price,” Spak said.
“With some lower exports and higher production, we expect that prices will end up in the $385 (per tonne) range for the 2003-04 crop.”
Weber said pricing a crop other than for cash delivery relies mainly on production contracts.
“Farmers shouldn’t even look at (the Winnipeg Commodity Exchange flax futures market),” he said.
That’s because only a small portion of the market is priced through Winnipeg futures, he added, resulting in poor price discovery.
“There is little liquidity (in the futures contracts), so if you take a position, there is no one to (sell) it to later,” he said.
“Unless exporters start to use the WCE’s flax (futures market), it is going to go away for good.”
Cargill, James Richardson International, Agricore United, Saskatchewan Wheat Pool and Toepfer Canada have been the only larger exporters using the market.
But even they appear to be avoiding the contract because they are concerned it isn’t liquid enough to ensure that open positions can be closed.
“If it disappears, then producers will lose the ability to know what the market is doing at any given time,” Weber said.
