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Published May 06, 2013, 10:35 AM

Flax moving higher

Probably no flax has been seeded yet in North America and the prime flax country is mostly still under snow. The flax that’s now in farmers’ bins is going to have to serve the industry through May, June, July and August.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — Flax markets have been moving higher for just more than a year. In March 2012, flax was trading around $12.50 per bushel. It’s been moving more or less steadily higher since then, with prairie processors now paying up to $17.75 per bushel delivered for brown flax and $18.50 to $19 on gold.

Both gold and brown in North America generally go into the human edible market. Gold, of course, is the premium product. Exports are down from last year and have to be. Supplies are on the tight side. AgCanada suggests the carryover next July will be 125,000 metric tons, but the trade reports there isn’t a lot left on farms. Certainly, deliveries dried up in the past few weeks as farmyards became difficult for hauling.

Viterra must have had, or have, a vessel that needs filling, as it boosted elevator prices by a dollar or more the week ending April 26. Other buyers had to match that increase, or bow out.

Origins other than Canada now play a larger role in international flax trade.

Conditions in Russia and Ukraine are mostly OK for new crop. On the prairies, the indication from Statistics Canada is sharply higher flax plantings and the lateness of spring suggests even more flax.

Probably no flax has been seeded yet in North America and the prime flax country is mostly still under snow. The flax that’s now in farmers’ bins is going to have to serve the industry through May, June, July and August. Discretionary users are already out of the flax market and the buyers that remain are relatively price insensitive.

Oats steady

Oats markets have been working higher since last summer and, although they took a tumble in March when corn was blindsided by a bearish U.S. Department of Agriculture report, have resumed their climb. Prices, however, are approaching, or have exceeded, $4 per bushel, which is historically near the top.

Emerson Milling in Manitoba is paying $4.10 for May delivery. May is traditionally the most difficult month to source oats, what with road bans, wet yards and the pressure of seeding. June and July delivery is $4. End users are hand to mouth. They consider these to be expensive oats. They’re waiting for a big new crop.

Lower 2013 canola acres

Statistics Canada estimated canola acres at 19.1 million, down 11.1 percent from 21.5 million in 2012. Using a five-year average yield estimate of 32 bushels per acre, production would reach 13.8 million metric tons, above 2012 production of 13.3 million metric tons, but below the 2011 crop of 14.6 million.

Canola acres may be lower, as the later seeding may cause some switching from other crops. But there is also the potential that some acres do not get seeded because of flooding or if spring rains further delay planting. The market is entering the 2013 to ’14 crop year on the heels of a historical tight carryout and the uncertainty regarding 2013 production will keep new crop prices supported.

The production of U.S. soybeans will balance out the canola market.

Despite the tighter fundamental structure for canola, prices will be heavily influenced by U.S. bean market structure and world vegetable oil values. For the canola prices to stay near historical highs, the world oilseed complex also has to stay strong. It appears that the increase in South American and U.S. soybean production will somewhat offset the potential strength in the canola market. Canola price direction will be heavily influenced by the U.S. soybean production prospects.

Marginal decline in barley acres

Statistics Canada has barley acres at 7.2 million, down 2.2 percent from the 2012 area of 7.4 million. Using a 10-year average of 57 bushels per acre, production has the potential to reach 8.9 million metric tons, compared with the 2012 crop of only 8.1 million metric tons. Keep in mind in 2012, the average yield was only 54.1 bushels per acre so production can be quite variable, given the growing season. The later seeding period may result in an increase in barley acres. It appears that the 2013 to ’14 carryout will come in close to 2.1 million metric tons, the same as the 10-year average. Therefore, we expect prices to also trend lower toward the 10-year average near $200 per metric ton delivered Southern Alberta during the 2013 to ’14 crop year.

Surge in spring wheat acres

Canadian nondurum spring wheat acres were estimated at 19.1 million, up a whopping 14.4 percent from the 2012 seeded area of 16.9 million. On average, production could reach 20.1 million metric tons, compared with the 2012 crop of 18.8 million.

Because of the increase in Canadian and U.S. hard red spring acres, the market will be under pressure during the summer months, but prices will be very sensitive to growing conditions and the world wheat production in general.

Editor's Note: John Duvenaud is the publisher of the Wild Oats Grain Market Advisory. For a sample issue, call 1-800-567-5671, email admin@canadagrain.com or visit canadagrain.com.

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