SASKATOON — Global flax production problems are raising prices in the European market but not yet in Canada.
Oil World estimates global production at 2.94 million tonnes, a 21 percent reduction from the previous year.
“Deteriorating profit margins induced farmers not only in Canada but also in Russia and Kazakhstan to shift to more lucrative crops,” the company said in a recent blurb on its website.
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Worldwide plantings of the crop fell by 15 percent.
“In the Black Sea region, surplus production in 2022 was followed by eroding prices and deteriorating profit margins, causing less plantings of (flax) this year,” Oil World analyst Siegfried Falk said in an email.
That was followed by less-than-ideal growing conditions.
“Poor weather conditions delayed harvesting in Kazakhstan, leaving a significant part of the crop still unharvested,” he said.
As much as half of the crop remains in the fields in Kazakhstan, according to market observers.
“This is raising the risk of additional quantitative and/or qualitative losses when the crop is harvested next spring,” said Oil World.
Falk expects Black Sea flax exports to “suffer a significant setback” in 2023-24.
Russia and Kazakhstan will be increasingly dependent on the European Union market because large stocks in China are expected to curb that country’s purchases.
Tight export supplies have prompted a price rally overseas. Russian origin flax prices in northwestern Europe have rallied about 16 percent in the past four weeks and were quoted at about US$575 per tonne during the first week of December.
A recent article published by APK-Inform said demand is far exceeding supply in the global flax market after a few years where the opposite was true.
“Today, the numbers have not simply leveled off, but the supply is about 100,000 tonnes lower than the level needed for processing,” Evgeny Karabanov, founder of Severnoye Zerno LLC, said during the Asia Grains & Oils Conference.
“Only the stocks, which, by the way, are very small, will help out.”
He said Kazakhstan has 30,000 tonnes of carry-in, Russia 50,000 tonnes and Canada up to 180,000 tonnes.
“The market situation is quite challenging. It’s unclear why everyone is so calm and relaxed for now,” said Karabanov.
“Come May, we’ll see how everyone rushes when there’s no more flaxseed.”
He said China has been an active buyer, contrary to what Oil World is suggesting. It bought 320,000 tonnes through the first four months of 2023-24, compared to 1.02 million tonnes for all last year.
While global prices are reflecting the tightness in exportable supplies, that is not the case in Saskatchewan, where prices have been stagnant to slightly declining since the beginning of October.
The price for No. 1 CW flax was C$578.50 per tonne as of Dec. 13, according to Saskatchewan Agriculture. That is well off the 2023 peak of $691 back in January.
Canadian farmers harvested 273,000 tonnes of the oilseed, down 42 percent from last year’s levels, according to Statistics Canada’s latest estimates.
Exports are forecast at 250,000 tonnes, up from 215,000 tonnes last year.
Meg Stagner, product group manager of flax with Scoular, said Agriculture Canada’s 2022-23 carryout estimate of 220,000 tonnes is more than double the normal volume carried over from year-to-year, so there is still plenty of supply despite the small harvest.
“The Canadian producer is in a unique position to store a lot of grain, in this case flax, when necessary,” she said.
Elevator bids are in the range of $14.50 to $15.50 per bushel. That is about 30 percent below where farmers are “willing to engage.”
Canada’s current prices are in line with what Black Sea flax is selling for in Europe after freight is added in, but little business is happening.
“I do expect at some point there will be some buying from Canada, but it will be after cheaper origins are exhausted,” said Stagner.
She wasn’t willing to speculate on when that will be.
There are no official estimates yet on U.S. production. Last year farmers in that country harvested 109,330 tonnes of the oilseed. Stagner expects the 2023-24 production will be about 20 percent lower than that.
Contact sean.pratt@producer.com
