WESTERN PRODUCER — Flax growers shouldn’t expect much price action in the new crop year, according to traders.
Prices have levelled off after plunging 36 percent in 2022-23 and that is likely where they will remain.
Old and new crop bids for brown flax are around $14 per bushel f.o.b. farm for movement before harvest, according to a July 5 market commentary by Rayglen Commodities Inc.
Yellow flax prices were another couple dollars higher at best.
That is a far cry from the $22 for brown flax at the start of the crop year. Growers can thank a burdensome carryout for the downturn.
Agriculture Canada is forecasting there will be 275,000 tonnes of stocks to start the 2023-24 crop year, which is more than a typical export program of late.
“Canada will be heading into 2023-24 with a large amount of carry that should leave values unchanged for the time being,” said Rayglen.
Mike Allaire, director of Western Canada for DG Global, agrees with that assessment.
“I don’t see the flax prices moving very much at all, to be honest,” he said.
That is despite a big drop in acres. Statistics Canada estimates growers planted 609,000 acres of the oilseed, a 22 percent decline from last year. It is the smallest flax crop in 73 years.
Allaire said Canadian prices are depressed due to “immense competition” from the Black Sea region. That Black Sea flax is being sold into China at a US$70 to $80 discount to Canadian flax.
Some Canadian flax will still move to that market because of the superior quality of the product.
But he thinks sales to China will amount to 50,000 to 60,000 tonnes this year compared to the heyday of 350,000 tonnes.
“It’s definitely hurting us,” said Allaire.
“It’s hurting our industry on the pea sector and the flax sector.”
Chuck Penner, analyst with LeftField Commodity Research, delivered a similar message at the Saskatchewan Flax Development Commission’s annual general meeting in January.
“As much as it pains me to say this, Canada doesn’t drive the flax market anymore,” he said.
Penner noted Canadian growers produced about 473,000 tonnes in 2022 compared to 800,000 tonnes in Kazakhstan and 2.3 million tonnes in Russia.
Allaire got slightly different numbers from a Chinese buyer, who told him Kazakhstan produced 600,000 tonnes that year and Russia another 1.5 million tonnes.
The buyer expects a downturn in production this year, forecasting 500,000 tonnes out of Kazakhstan and 1.2 million tonnes from Russia.
But that will still be enough for the Black Sea region to continue dominating the Chinese and European Union markets.
Allaire believes Canada’s carryout from the 2022-23 crop will be closer to 225,000 tonnes and growers should harvest another 325,000 to 350,000 tonnes this year.
“We (will) still have comfortable stocks for the demand that we’re seeing,” he said.
He is forecasting 135,000 to 140,000 tonnes of carryout from the 2023-24 crop.
That’s why he thinks prices will remain in that $14 per bu. range. Even if there are production problems in the Black Sea, he doesn’t think $20 is in the cards.
Rayglen said Canada’s crop is looking good so far.
“Crop conditions are on the better side of the 10-year average, but there is still a long way to harvest, and this could change,” the company said in its market comments report.
Growers in the United States seeded 140,000 acres of flax, a 47 percent decline from last year.
“The U.S. is reporting similar stats, with lower acres and high carryover, so while their crop conditions are poorer than Canada’s, it is likely to have little effect on value,” said Rayglen.
There are not a lot of export statistics out of the Black Sea region. However, APK Inform reports that Kazakhstan shipped 302,190 tonnes of the crop through the first six months of the 2022-23 campaign, a 58 percent increase over the same period one year ago.
By comparison, Canada is expected to ship 150,000 tonnes for that entire crop year.
Allaire did not sound hopeful about Canada regaining its stranglehold in the Chinese market anytime soon.
“I don’t see us being a major player again as a supplier for China,” he said.
