Value of oilseed flax products

Commercial seed (grain)

The value of oilseed flax grain sold by the farmer is dependent on the value of the two main products from processing – oil, which forms about 40 percent of the seed, and the residual meal, at about 60 percent. The precise oil content of the seed will vary with variety, environment and climate. The yield of oil and meal after processing will depend on the method of oil extraction. There are traditional uses for both oil and meal, which require expelling the oil by pressing without further extraction using a solvent. Expeller processes leave between 8 to 15 percent of the oil in the meal. The oil portion is of more value per tonne than the meal. If more oil is left in the meal, then the value of the meal must increase to compensate for the loss of revenue from oil. Traditional users of high oil meal (often called oil cake) will therefore pay a premium for the product. Whether this premium fully compensates for the loss of revenue from oil will be a reflection of the prevailing market conditions for both oil and meal.

The value of oilseed flax on the futures market makes interesting reading in relation to the supply and demand picture discussed above. In the late 1980s, Canada and Argentina combined produced about 800,000 tonnes of seed. At the same time, the cash prices in Winnipeg (WCE), were in the $400–450 range (Figure 15.4) – reflecting strong demand and limited supply. In 1990/91, the cash price dropped $175 as production in the two main exporting countries rose to 1.25 mmt – an increase of 63 percent. Production then dropped dramatically and by 1992/93 was 500,000 tonnes combined from Canada and Argentina. However, the huge production from the previous years had built a carryover of 400,000 tonnes in Canada, so that total supply was close to 800,000 tonnes. As stocks began to drop so prices gradually climbed, eventually breaking through the $400 level again in 1995/96. By this time, as we have seen, only Canada was a major exporter. The potential volatility of the flax price is also illustrated in Figure 15.4 where, as noted above, the cash price dropped nearly $175 per tonne in one year (between 1989/90 and 1990/91).

The effect of these changes in the global pattern of production, on farmers in western Canada, was to re-establish oilseed flax as the valuable rotation crop that it is. Lacking diseases in common with either cereals or canola/oilseed rape, flax has always played a valuable role as an alternative crop in rotations. Although lacking the yield potential of canola, its hardiness in tolerating extremes of weather has also contributed to its attractiveness. In addition, the much lower costs of production for oilseed flax versus canola, are a major incentive and will be discussed later.

While production was falling from 1990/91 in Canada and Argentina, it was rapidly building in Europe. The lack of a winter variety and the lower yield compared to even spring oilseed rape, required the highest subsidies of all grain and oilseed crops in Europe, to ensure production in the European Union. By 1992/93 the supply of linseed from domestic production in Europe had reached more than 250,000 tonnes, only to gradually fall back again as other higher yielding crops were preferred by farmers in the UK, France and Germany, the main producing countries in the EU. It is worth noting that under the EU Agenda 2000 proposals, the area subsidy for oilseeds will be gradually reduced until it is equal to cereals. This is expected to result in an increase in cereal production on account of the higher yield potential for cereals, and a decrease in the production of oilseeds, especially linseed. However, further modification of support programs, agronomic considerations, and of course market prices, will all continue to impact production levels in Europe.

Linseed oil and meal

A range of valuable products is produced from linseed oil, including: oil based paints and varnishes; wood preservatives; floor coverings such as linoleum; environmentally friendly adhesives; concrete preservative; printing inks. Although other vegetable oils can substitute for linseed in some of these applications, the additional cost from slower drying (lower Iodine Value) or other functional concerns, means linseed oil has few if any substitutes in its many applications. Virtually all the linseed oil produced in North America, Europe and Japan is used for such purposes. As noted earlier, however, use by traditional producers such as China, India, and Russia has also included some human consumption.

This lack of substitutability, and the dependence on one major exporter, means that a certain degree of in-elasticity and therefore potential price volatility is associated with linseed oil. This is illustrated in Figure “Crude vegoil prices NW Europe 1988/89 to 1998/99P”, where the NW European price for linseed oil lacks a consistent relationship with the major vegetable oils, sometimes at a huge premium (1989/90) and sometimes at a significant discount (1993/94).

Taking a snapshot of prices to illustrate pricing relationships, on June 7, 2000 the NW Europe crude vegoil prices per tonne were quoted as: soybean oil $323.84, rapeseed oil $341.04, sunflower oil $382.50, linseed oil $425.00. These values are substantially lower for all oils than in 1998 and 1999, as shown in the calculation made in the following example of product values.

For oil-rich seeds such as oilseed flax, sunflower and canola (which contain 40 percent or more oil), the meal provides a smaller portion of the value, particularly following solvent extraction. In comparison, soybeans contain only about 20 percent oil. In the case of oilseed flax, the following equivalent seed value based on component values in May 1999 versus 1998 may be derived, and compared with soybean and rapeseed (canola) oil.

Thus, at the prices used in Table “Equivalent seed value of flaxseed (linseed), soybean and rapeseed/canola based on their component values”, the contribution to the value of the seed from oil was up to 75 percent for linseed, slightly more for rapeseed, but only 40–44 percent for soybeans. On the meal side, 25 percent of the value was from meal for linseed, but more than 55 percent for soybeans. These relative values reflect mostly the lower oil content of soybeans, and to some extent the lower value of soybean oil.

The value of soybean meal is higher than linseed meal, mostly on account of the higher protein level (44% versus 36%), its versatility for use with all classes of livestock, and its place as the standard among protein meals. When solvent extraction is not used, the increased level of residual oil from the expeller press increases the value of linseed meal. Certain sectors of the livestock industry, such as dairy farmers in Europe, are willing to pay for this additional energy as they see the benefits in animal productivity. The cyanogenic glucosides in linseed meal are of no concern in ruminant feeding, but a reduced level of feeding for growing pigs is recommended. Plant breeding is underway to reduce the level of the cyanogenic glycosides to very low levels, thereby enhancing the value of the meal for pig feeds. Additional breeding developments, which will reduce the level of soluble fiber (gums), will enhance the value of linseed meal for use in poultry feed.

While the oil component commands most of the value in linseed, the bulk of the product after processing is meal (about 60 percent). There are no long term statistics for linseed meal disposition or prices, since linmeal is not used as the major meal component of livestock rations. There are specialized markets for particular classes of livestock such as dairy cattle where linmeal, especially expeller high oil cake, is favored, but these uses are relatively small and regional. The latter are premium markets, but generally linseed meal is valued between soymeal and rapeseed meal.

Whole seed flax for human consumption

A small, but growing, market is the use of whole seed oilseed flax for human consumption. This is a premium market, but again no statistics exist as to the precise values or volumes that are used in this way. Flax is receiving increased attention by nutritionists for the valuable fiber, lignans, and the omega-3 in the oil. In spite of its nutritional value, government recommendations exist in some countries restricting the maximum level of flax included in foods. The need for these restrictions is questioned by some, especially when the seed is included in baked products.

The largest market for whole seed consumption is Germany. No official statistics exist for this market, but estimates suggest 80,000 tonnes is used for food in baked products, mueslis, and packaged for sale through health food stores. The total whole seed consumption in Europe has been estimated at 100,000 tonnes or more annually, including human consumption and specialized feeds for horses, show animals and in pet foods. In North America the level of consumption is much smaller, but it is growing as elsewhere in the world. This growth will be based on the real health benefits of flax, namely the soluble and insoluble fiber; the lignan SDG (a valuable phytoestrogen, which is at a very high level in flax); and the omega-3 fatty acid in the oil.