Flax bids rise on bullish price ideas

(Resource News International) –– Cash bids for flaxseed in Western Canada have been holding steady to firm and were expected to see some additional strength, given uncertainty regarding the supply situation as well as a bullish outlook among producers.

Cash bids for flaxseed were easily in the $14 per bushel range, if not higher, in some areas of the Prairies, said Mike Jubinville, an analyst with ProFarmer Canada.

“Of the commodities, producers have become real reluctant to deliver flaxseed into the cash pipeline as they anticipate even higher values down the road, especially as supplies become even more scarce,” he said.

Statistics Canada’s unexpected reduction in the old-crop flax supply base, along with lower-than-anticipated new-crop production ideas, have left supplies extremely tight.

Flaxseed stocks in Canada at the end of the 2010-11 crop year have been forecast at a tight 100,000 tonnes by Agriculture and Agri-Food Canada. In 2009-10, flax carryover was 289,000 tonnes.

Flaxseed production of only 537,000 tonnes was tied to the tight ending stocks outlook in 2010-11.

Jubinville felt there may still be some more upside in the flax cash price outlook, but the commodity may be nearing a peak in terms of end-user demand.

“Most of the Canadian flaxseed is currently being shipped to destinations in the U.S. and to China, as the Triffid issues continue to stymie demand from Europe,” he said. “However, the buyers in the U.S. and China were said to be losing interest as Canadian flax values continue to climb.”

Jubinville noted that as long as canola bids continue to climb, flaxseed should maintain its $2 to $3 premium over canola. But at some point, end-users will look at alternatives if they can.

End-users were rumoured not to have covered very much of their forward demand given the high price structure of flax.

The discount on flaxseed containing Triffid genetics was said to be in the $1 per bushel range.

Triffid, developed in Saskatchewan in the 1990s for tolerance to sulfonylurea herbicide residues in soil, was approved but then deregistered in 2001 without ever being sold as commercial breeder seed.

Canada’s flax industry had successfully lobbied for Triffid’s deregistration, for fear of losing export markets in Europe and elsewhere if a GM flax were to be introduced.

But several importing countries shut their ports to Canadian flax last fall after Triffid appeared. Its genetic material was later found to have contaminated breeder seed of two conventional flax varieties, CDC Normandy and CDC Mons, while trace levels were found in three other registered flaxes.

Cash bids for flaxseed delivered to the elevator in Saskatchewan, based on Prairie Ag Hotwire data, currently range from $$12.94 to $13.75 a bushel, in Manitoba around $14.31 and in Alberta from $13 to $13.74.

Cash bids for old-crop flaxseed delivered to the elevator in Saskatchewan, based on Prairie Ag Hotwire data, at the beginning of October ranged from $12.15 to $12.64 a bushel, in Manitoba around $13.24 and in Alberta from $11.86 to $13.16.