- Declining North American production has supported flaxseed prices
- Can flax prices rise further amid heightened Chinese resistance?
- It's possible this spring may bring incremental demand and price support associated with additional European buying
Flax output declined notably in Canada in 2016, falling to an estimated 579,000 tonnes, well down from 942,300 tonnes the year before and the lowest output since 488,900 tonnes produced in 2012.
The PFCanada supply/demand balance sheet below was developed with a 2016 production estimate of 605,000 tonnes, but adjusted based on yield, subject to later revision.
Canadian flaxseed supply and demand
And while it may be a smaller producer compared to Canada, a decline in U.S. flax production in 2016 has also helped support prices on this side of the border.
A decline in U.S. flax production in 2016 has also helped support prices on this side of the border
American flax output this past year amounted to 220,480 tonnes, down 14 per cent from a year earlier as a drop in harvested area more than offset an increase in the average yield. Harvested area totaled 367,000 acres in 2016, down 20 per cent from the previous year, while the average yield came in at 23.7 bushel per acre, up 1.6 bushels from 2015 and the highest on record.
The U.S. is a buyer of Canadian flax, and a smaller crop south of the border could mean additional such purchases later on in the 2016-17 marketing year. However, currency issues are also likely to remain a market factor, with any strength/weakness in the Canadian dollar impacting how much business American buyers ultimately do.
We have seen Prairie cash bids rise through the fall harvest season to as high as $13.25 per bushel delivered on No. 1 quality, and since then, stabilize.
It's possible this spring may bring about some incremental demand and price support associated with additional European buying to offset reduced imports of former Soviet Union flax, that is, given tightened residue tolerance specifications on the herbicide haloxyfop.
What kind of price premium can be expected? Well, that is anyone’s guess at this time, if there is to be any additional premium at all.
Linseed pricing, landed at Rotterdam, rallied noticeably through November and December, advancing about US$85 a tonne to about US$475 a tonne, landed Europe. But since then, we have seen that price back off by about $25 a tonne.
We are uncertain as to what volume of business Canada will be able to regain from the Russian hold of the European demand market. Something for sure this spring, but will it be significant enough to really alter our domestic price outlook?
With the start of 2017, we have yet to see additional premiums develop in Europe. As a precaution, I believe it to be prudent to view Prairie cash prices at $13 a bushel as an incremental selling opportunity, especially since we are also now seeing a hardening of resistance amongst Chinese importers to pay more than this price level equivalent. China is Canada’s largest export market for flaxseed, responsible for about 60 per cent of shipments.
There is an expectation that Canadian flax acres will increase appreciably in 2017. But with fall delivered new crop cash bids lagging below $11 a bushel, it's likely not yet attractive enough to see an increase back to 1.4 million acres.
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