Canadian flaxseed supplies in the 2011-12 and 2012-13 crop years will be on the tight side, as China has replaced Europe as a key export destination for the commodity.
From the 2011 season up to April 2012, China imported 85,700 tonnes of flax, up from 35,000 tonnes during the entire 2010-11 season. Europe limited its imports to 17,300 tonnes, which was down by close to 90 per cent from the previous year.
Fred Oleson, chief of the market analysis group with Agriculture and Agri-Food Canada in Winnipeg, said the increase in flaxseed exports to China is the sign of a long-term trend for China. Over the last few years, the country has required more oilseeds and meal from outside markets, he said.
According to AAFC statistics, flax seeded and harvested areas are expected to increase by 50 per cent in 2012. Supply is also forecast to increase by seven per cent.
Exports are expected to increase as well, largely because of the emergence of China as a major flax importer from Canada.
Europe, the former top destination for Canada's flax, has significantly reduced its flax imports from Canada over the past few years, after Canadian flax was found containing a genetically modified form of the crop. The GMO seed, called CDC Triffid, was never commercially produced and stocks of it were ordered destroyed in 2000, but traces remained in 2010.
The European Union has a zero-tolerance policy toward genetically modified crops. Since the discovery of Triffid, the EU severely limited imports of Canadian flax. Instead, it directed its focus to the former Soviet Union nations to fill the majority of its demand.
Oil World, the Hamburg-based newsletter, said Russia, Kazakhstan and Ukraine are forecast to deliver 510,000 tonnes of flaxseed combined by the end of July. That number is up from only 237,000 tonnes last year.
Oleson anticipated Canadian flaxseed exports to China will be up to about 106,000 tonnes at the end of the 2011-12 season, while exports to Europe may only reach between 20,000 and 30,000 tonnes. For 2012-13, Oleson predicted a slight increase in exports to Europe, but for China to remain the major trading partner.
However, China may prove to be a more unreliable trading partner for Canada. China's demand for oilseeds varies from year to year and a lack of transparency in the Chinese food reserve policy makes demand hard to determine.
Nonetheless, China could stand in for the market lost in Europe, said Chris Beckman, AAFC's oilseeds analyst in Winnipeg.
"China is a price-sensitive buyer, and they're kind of a wild card. I know for a lot of crops, the industry welcomes the Chinese business, but they wish they could stabilize it," he said.
In order for Canada's flax market to return to highs seen before Triffid was detected, he said, Canada needs to assure Europe its flax is completely GMO-free, overcome competition from the FSU in Europe and turn China into a reliable and consistent trading partner.
--Ryan Kessler writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.
Flax industry sees "good progress" against Triffid,
Oct. 12, 2011