Strong new crop prices for flax are expected to drive acres higher again in 2015.
“The economics of flax currently make a lot of sense. There are a number of new crop bids in the $12.50 (per bushel) range. Compared to other crops that’s quite profitable, and compared to history that’s quite profitable, so I think we’re going to see another increase,” said Chuck Penner of LeftField Commodity Research following his flax outlook presentation at the GrainWorld conference in Winnipeg last week.
He’s expecting Canadian flax acres will rise by up to 15 percent to around 1.7 million.
With China becoming a major customer, he noted Canadian flax acres and exports have bounced back to the levels seen prior to the Triffid situation in 2009, when European countries closed their borders to Canadian flax. At the time, Europe was buying around two-thirds of Canadian flax. For 2014-15, Penner is projecting China will take almost half of Canadian flax exports, with the U.S. and Europe each accounting for around a quarter of export demand.
There is potential for global flax supplies to become burdensome by the fall of 2015 if farmers in other growing regions also plant 10 to 15 percent more flax, he said. Increased supplies from emerging flax-producing areas of Russia and Kazakhstan could reduce demand for Canadian flax in Western Europe.
“They’ve been moving their product into Rotterdam and northwest Europe, where the crushers are, and they’ve been ramping up production, or trying to,” said Penner in the video below. “But if they really hit on all cylinders, they could take up more of that European market and hopefully none of the Chinese market.”
He suggests locking in some new-crop prices now, as there’s a possibility they could drop below $10/bu after harvest.
Chuck Penner discussing the flax market at Grainworld: