Thursday, 10 January 2013 11:50

The Shifting Nature of the Flax Trade

Written by  Dan Hawkins
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Last month came the announcement that Glanbia, owners of the flax facility that burned down in Angusville last March, will rebuild in South Dakota. It's sad news for those who worked at the plant. It also serves as a reminder of the shifting nature of the flax trade in general, which will affect the way Canadian flax growers produce and market their crop in the years to come. In short, flax is looking more and more like a specialty crop game.

Historically, Western Canadian farmers grew and sold more flax, largely through commodity markets. In recent years, however, the lucrative European market has been all but conceded to lower priced flax grown in Russia and Ukraine.
We have maintained commercial channels in the US and China, but lower overall demand for Canadian flax and a drop in the number of buyers have decreased prices and increased price volatility. A decrease in production followed.
Meanwhile, a bright point in the flax trade in the last five to ten years has been the increase in demand for premium grades to supply a burgeoning health food market. Many growers have enjoyed the better margins it offered. The tradeoff, however, is that its end users typically trade in lower volumes.
So: Western Canadian farmers are growing less flax; more of what they grow is feeding the high-end (and more finicky) human consumption market; and, since end-users in this market are smaller, their purchases tend to fill trucks rather than trains.
In other words, flax is looking increasingly like a specialty crop well-suited to custom growing contracts, much in the way specialty canola is grown and sold. And this is what we're starting to see. Several new and improved flax contracting options have become available from small-volume buyers in recent years, with more options expected to develop.
Farmers selling flax in small volumes to high-grade buyers may want to consider pursuing specialty contracts, since it makes more sense to have a guaranteed buyer and specific delivery window arranged ahead of time. Ideally there should also be an Act of God clause to manage the variability in yields.
To find these opportunities requires calling around. Cash-grain brokerages are a good place to start. It can take a bit of time to find a suitable arrangement, but it could easily be worth the trouble. Increasingly, relying on commercial channels can lead to steep discounts and difficulty in timing sales to match the needs of the farm.

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