Flax is an oddity among oilseeds. While it generally follows the prevailing trend set by the global vegetable oil market, it can resist the trend too.
Take earlier this winter, for instance. While canola prices were languishing, trading in a narrow range at the Winnipeg Commodity Exchange, flax futures made new contract highs early in January when China unexpectedly came into the Canadian market.
Flaxseed can get away with this errant behavior, at least compared to other oilseeds, because it is used as an industrial rather than an edible oil, says Mike Jubinville, analyst with Growers’ Marketing Services in Winnipeg.
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Demand raises prices
And with just two main players in the commodity – Canada on the selling side and the European Union on the buying side – unexpected demand from a country like China meant higher prices.
Flax prices have come down from that January peak, Jubinville said, but he’s still bullish about prospects for the 1996 crop.
It’s a given that Western Canadian farmers are likely to sacrifice oilseed acres in order to grow more wheat and barley.
But Lyndon Peters, of Agriculture Canada’s grain policy directorate in Winnipeg, thinks flax acreage, unlike canola, may not see as steep a decline because of agronomic and economic reasons.
That’s because flax wasn’t subject to the same sort of disease and pest pressures as canola was last year. Different weeds and control options mean flax is an attractive crop for farmers to rotate.
Western Canada’s flax crop last year was the biggest in recent memory at 2.16 million acres, for production of 1.1 million tonnes.
But even with that large crop, Peters said anticipated flaxseed carryover this year will be “snug” at about 188,000 tonnes. Anything less than 200,000 tonnes generally allows prices to be more buoyant.
Flax forecast
Peters is forecasting flaxseed exports this year will actually be off by about 60,000 tonnes from 1995, at not quite 800,000 tonnes.
The UGG is more optimistic with an export forecast of 885,000 tonnes. But both analysts agree carryover is still going to be below the important 200,000-tonne mark.
Peters said it’s up to the market to make sure enough acres get planted to meet European demand as well as other customers including China, South Korea, Japan, Mexico and the United States.
“It’s the first time in the last decade there’s been any challenge to oilseed acreage expansion,” Peters commented. “It’s the first real year the market has to ante up.”
Because of the buoyant outlook, Jubinville is advising farmers not to be too anxious to forward price new-crop flax.
Old-crop flaxseed, however, is different. Jubinville said flax prices have fallen nearly every spring during the last 15 years.
Unless farmers are willing to store until summer, Jubinville said selling sometime between now and the opening of the St. Lawrence Seaway may be an option, since the EU often buys ahead of the spring shipping season.
