Flax markets are at risk of being oversupplied if North American growers follow through with their seeding plans, says an analyst.
“It’s a small commodity and big shifts in acres make a big difference,” said Marlene Boersch, managing partner of Mercantile Consulting Venture.
The U.S. Department of Agriculture is forecasting 400,000 acres will be planted in that country this spring, a 31 percent increase over last year.
Statistics Canada is predicting 1.14 million acres in Canada, a 22 percent hike.
“The one saving grace is that the ending stocks everywhere are very small, so that will mute it a little bit,” said Boersch.
Agriculture Canada is forecasting 50,000 tonnes of carryout from the 2020-21 crop.
Boersch thinks that sounds about right.
“The prices show it’s pretty sold out,” she said.
“We have some clients that grow flax and none of them have anything left.”
She always has doubts about flax acreage estimates. Her focus is on demand, in particular how much the Europeans are going to purchase in 2021-22.
They stunned the market this crop year, buying large volumes of Canadian flax in August, November and December.
Canada shipped 166,440 tonnes of flax to Belgium in 2020, nearly five times the volumes of the previous year. The only market that purchased more was China, which bought 169,048 tonnes.
Boersch said the surge in Canadian sales to the EU is the result of Black Sea flax making its way into the Chinese market, creating a void in the EU.
APK-Inform reports that Kazakhstan is forecast to export 540,000 tonnes of flax in 2020-21, the exact same amount Agriculture Canada is forecasting for Canada.
An estimated 150,000 tonnes of that Kazakh flax will be sold to China, up from 104,300 tonnes the previous year and nothing prior to that. China made Kazakhstan a certified importer of the crop in 2019.
But the export pace of Kazakh flax to China slowed over the last four months of 2020.
“(The) Chinese government banned acceptance of packed cargoes due to risks of coronavirus,” Evgeny Karabanov, founder of Severnoe Zerno LLC, told APK-Inform in a February interview.
“It resulted in mass accumulation of rail cars at the border.”
He thinks 2020-21 trade volumes would have been higher than 150,000 tonnes if there hadn’t been that disruption.
Karabanov said the spread between Kazakh and EU flax prices narrowed considerably in 2020 and no longer covers the logistical costs.
“That is why Kazakh exporters prefer to sell to China, as the delivery cost is about US$35 to $40 per tonne compared to $115 to $125 to Europe,” he told APK-Inform.
Kazakhstan has not completely abandoned the EU market. It will ship an estimated 205,000 tonnes to Belgium in 2020-21 and another 65,000 tonnes to Poland.
Russia is another big exporter of flax. APK-Inform reports that it shipped out 400,000 tonnes of the crop between July 1, 2020, and March 18, 2021, a seven percent increase over the same period a year ago.
Boersch hasn’t seen any estimates of what is going to happen with Black Sea flax acres but it is reasonable to assume they too will be on the rise given that prices are record-high in Kazakhstan.