Flax end-users rationing demand

(Resource News International) — Tight flaxseed supplies, along with continued strength in the outside oilseed markets, should keep flaxseed values well supported over the next crop year. However, the high prices are causing end-users to ration demand, according to sources.

Canadian farmers planted 1.51 million acres of flax, according to the latest Statistics Canada estimates, which compares with 1.305 million in 2007. While production could be up on the year, the planted area is still historically low and available supplies will be smaller due to tight carry-in stocks.
Agriculture and Agri-Food Canada is currently forecasting 2008-09 flaxseed ending stocks at only 33,000 tonnes.

According to Prairie Ag Hotwire data, bids for both old- and new-crop flaxseed can currently be found as high as $19.50 per bushel in Saskatchewan and $18.50 per bushel in Manitoba and Alberta.

The supply-and-demand picture is “tight,” said one line company flax merchant on the reason for the strong prices. With prices sitting at such historical highs, the merchant thought a move to $20 or $21 per bushel wouldn’t really make much difference.

Gains in the outside oilseed markets, including soybeans and canola, also had much to do with the strength in flax, the merchant said.

The merchant thought the commodity was largely a follower of the outside markets, rather than a trendsetter on its own.

A second commercial flaxseed exporter commented that “farmers are achieving some pretty good values as they clean out their bins.” However, he added that there are also large discounts for off-grade flax, with many farmers having held onto their supplies too long before making sales.

With flaxseed prices as high as they are “buyers in Europe are telling me that their demand will be reduced this year,” said the exporter. High freight rates and the strong Canadian dollar should also contribute to the rationing, he said.

Both exporters thought Canada’s part in the international flaxseed market was dwindling, with the commodity becoming more of a specialty crop in Western Canada. As a result, the high prices may not necessarily be tempered by increased acres in the future.

“I think canola has received the attention of research dollars and it has continued to be improved. Whereas, flax has not seen that development,” said the commercial exporter. He thought flaxseed requires more investment in order to improve yields, if it is to regain prominence among producers.

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