The right time for flax

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Published: September 8, 1994

WINNIPEG – Prairie farmers apparently picked the right time to swing back into flax production.

Prices have been uncommonly buoyant for a year in which production levels are expected to surge nearly 60 percent to over 960,000 tonnes, the highest level since the mid-1980s.

Futures market prices in recent weeks have been at their highest in the past five years, with some observers predicting they could top $300 per tonne before the winter is over.

Both the technical charts and the fundamentals such as supply and demand are pointing to continued strength. Analysts say there are several reasons for the bullish outlook.

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“It’s been so cheap for so long, it’s finding its way into the protein meal markets,” said Greg Kostal, an analyst with United Grain Growers.

European flax production is down due to reform of their agricultural support programs and production has been scaled down in Argentina.

That leaves Canada as the only major net exporter of flaxseed in the world. Lyndon Peters, an analyst with Agriculture Canada, said Canada is expected to produce most of the exportable flax supplies in the world this year.

Peters said annual world trade in linseed has ranged between 580,000 and 630,000 tonnes over the past five years. He is predicting Canada’s flax exports could reach 670,000 tonnes in the 1994-95 marketing year.

But the major factor affecting the demand for flax is the low Canadian dollar relative to competing currencies. “Between January to now, the Deuchmark has appreciated 20 percent relative to the Canadian dollar,” Kostal said. “That creates enormous buying power.”

It places Canada in an enviable position as an exporter, particularly for commodities which can compete in protein meal markets.

And it’s a major reason why Canadian farmgate prices have remained firm, despite huge increases in production of commodities such as flax, peas and canola.

Kostal anticipates some price weakness this fall as the harvest comes into the system, but the trading range for flax will be generally fall between $275 to $325 per tonne. That translates into farm gate prices of between $6 and $7 a bushel.

But he cautioned while the supply and demand situation looks strong now, exports could be affected by the availability of transportation capacity, how companies manage their sales, and the fluctuating Canadian dollar.

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