FarmLead’s 2018 Flax Prices, Market Review

As we turn the calendar on 2018 flax prices and markets, it’s a time of reflection, but also one of planning. That being said, as a company, FarmLead is also reflecting on 2018 and planning for 2019 with some new products and tools! We’d love for you to have some input in the evolution of FarmLead (including some early access to try out some new tools) and so, before continuing your reading, please answer this 4-question survey. Thanks!

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FarmLead’s 2018 Flax Prices, Market Review

Earlier this month, Statistics Canada released the final yield and production estimates for the 2018/19 crop year. The published data is a testament to the ‘tough’ versatility of Canadian crops. Specific to the Canadian flax crop, 2018/19 production forecast was revised downwards by 18,400 MT compared to last month’s StatsCan estimate. Total production is now pegged at 492,700 MT, down 11% compared to 2017/18, but not as small as previously thought.

2018 Canadian Flax Production and Yields - StatsCan

StatsCan Dec 2018 Crop Production Estimates

In the U.S, flax production for 2018/19 is expected to come in at 74,000 MT, down 24% year-over-year. Like Canada, this is mainly attributed to lower acres and flax yields.

2018 U.S. Flax Production vs Yields

Kazakhstan Influences Flax Prices More Than Ever

In September of this year, the global flax market was shaken by data revealed by the Economic Ministry of Kazakhstan. Estimates called for 2.72 million acres planted for flax, a forecast that was 18%, or 420,000 acres higher compared to the previous month’s estimate.

Kazakhstan Flax Production and Acres

As a result of bigger Black Sea production, this has suppressed upside potential on global flax prices. Despite Canada and the U.S. seeing its own significant drop in flax production, Kazakhstan’s bumper crop has essentially stabilized the global flax supply. As such, the significant upside that we had previously been expecting for flax prices has been tempered a bit. Again, this is mainly due to the larger-than-expected flax harvest out of Kazakhstan.

With flax prices in the Black Sea country being so much lower than Canadian flax prices, it’s not hard to understand why Canadian flax exports have been a bit softer so far in the 2018/19 crop year (more on this later). 

Comparison of Kazakhstan Canadian Flax Prices

Flax producers in Kazakhstan have seen a record harvest in 2018/19. For the first time ever, Kazakhstan is the world’s largest flax producer, de-throning Canada’s number one spot in terms of total production.

For the current marketing year, Kazakhstan is expected to export 550,000 MT of flax, up 39% year-over-year, while Canada is expected to export 400,000 MT, down 18% year-over-year.

Comparison of Kazakhstan Canadian Flax Exports

The top buyers for Kazakhstan flax are Belgium, followed by Afghanistan and Poland. Most of that flax is processed and then shipped to China.

As of now, China’s appetite for Canadian flax still remains relatively strong and China is by far the largest flax customer for Canada. However, with improved infrastructure, agriculture technology, and warming Kazakhstan-China relations [1], it will only be a matter of time until Canada diminishes in importance to China for flax supply.

At the world level, global flax production is estimated at 2.69 MMT, up slightly from the 2.59 MMT in 2017/18.

Flax Exports No Help for Canadian Flax Prices?

Through Week 20 of the 2018/19 crop year (ending December 16), Canadian flax exports are sitting at a total of 113,200 MT, down 7.1% year-over-year.

2018-2019 Week 20 Canadian Flax Exports (Cumulative)

2018-2019 Week 20 Canadian Flax Exports (Weekly)

On the domestic movement side, farmer deliveries year-to-date are well behind last year, down 61.6% to 139,000 MT.

In the latest AAFC estimate on principal field crops in Canada, flax production for 2018/19 is expected to come in at 493,000 MT, down 11.2% year-over-year. All things considered, this is quite disappointing. As you can see in the chart below, Agriculture Canada had some very large expectations for Canadian flax exports back in August. In that month’s outlook report from the AAFC, 2018/19 flax exports were forecasted at 600,000 MT, which would have eclipsed the previous year’s record of 555,000 MT. 

AAFC Estimates of Canadian Flax Market (Production & Exports)

However, as the size of the Kazakhstan flax harvest was realized, this put a damper on the outlook for not only Canadian flax exports, but also higher flax prices. With news in place and the Canadian harvest priced in by the market, we decided to increase our flax sales position in early November.

Stronger Flax Prices in 2018

Average flax prices in Western Canada started the year at $11.74 CAD per bushel. Over the course of 2018, prices gradually crept higher in response to low production in Canada and record low ending stocks. As of December, average flax prices in the Canadian Prairies were sitting at $12.48 CAD per bushel. This is up 6.3% year-over-year.

Saskatchewan Flax Prices - 2018 Performance

Despite a steady climb in prices in the past few months in Canada, part of the support is due to weakness in the Canadian dollar.

AAFC Estimates of Canadian Flax Prices & Ending Stocks

Across the border, flax prices in North Dakota have are sitting at $11.15 USD per bushel ($15.16 CAD per bushel), up 6.7% compared to the same time last year

North American Flax Prices

Promising Flax Prices in 2019?

Overall, flax prices have enjoyed a pretty solid 2018, all things considered. This will likely buy a few acres in 2019 though, which in turn could negatively impact flax prices next year. We’ll need to watch any production potential out of the Black Sea, as well how Chinese flax demand shakes out.

Be sure to be back here on the FarmLead Insights page to check out our 2019 outlook for oats prices, to be published in January 2019.

To growth,

Victor Han
Research Analyst
FarmLead – North America’s Grain Marketplace

About the Author
Victor Han

Victor Han is an Ottawa native with a passion for data analysis. After obtaining a degree from the University of Ottawa in Biomedical Science and Business, Victor worked in the food industry as a market analyst. Since switching his attention to agriculture, Victor applies his passion for science and the natural world to grain marketing.

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