Flax prices have been creeping higher for old- and new-crop positions lately, but remain
highly variable from one buyer to the next. Bids at some delivery points have risen by
about $1 per bushel from a few weeks ago, but a company down the road could still be $2/bu.
The spot market for flax has rebounded back up to March highs in the $17/bu. area, after
trading down to around $15/bu. throughout April. For 2008-crop production, bids are now
above $16/bu. in some locations. Only a few smaller-scale buyers and edible flax
processors are seen offering an “Act of God” clause on flax, but have been doing so at
similar price levels to what the bigger flax players are paying for flax without this
protection in new-crop contract.
Statistics Canada provided a numerical reminder to the trade recently that flax supplies in
Western Canada are very tight. In its recent stocks report, the agency showed a drop of
300,000 tonnes as of March 31, 2008 from the same time last year.
It’s interesting to
note that at the start of 2007-08, supplies were down by a similar amount from the
previous year, due to the smaller crop size. The consistent difference in supplies
throughout 2007-08 indicates that higher prices are not doing much to ration demand.
At this stage, there’s only room for approximately 200,000 tonnes of export business in
the current marketing year, during April, May, June and July. Domestic consumption is
still forecast at 300,000 tonnes, but ending stocks may rise, by about 25,000 tonnes,
compared to our earlier expectations.
This doesn’t change the flat to higher outlook for
old-crop flax prices, though; it is simply a reduction of the residual feed, waste and
dockage component of demand, which we can see from the March 31 stocks figure has
been lower so far in 2007-08.
— The FarmLink Market Insight was researched and produced by FarmLink Marketing Solutions, a marketing advisory service for Prairie farmers, and is published here with permission of the authors.