Flax mostly harvestedFlax has mostly been harvested and, as usual, there are few quality issues.
By: John Duvenaud, Agweek
WINNIPEG, Manitoba — Flax has mostly been harvested and, as usual, there are few quality issues. Total Canadian production should be more than 600,000 metric tons. Canadian flax production is recovering. Last year, less than 500,000 metric tons were produced and in 2011 it was less than 400,000. But, $16 and $17 per bushel bids this past winter brought seedings back up.
There’s increased competition from Eastern Europe, as well. That area produced 900,000 metric tons this year, by far its biggest flax crop ever. This flax fills virtually all the European market, although miniscule amounts of Canadian flax do now trade into Europe.
The dynamics of international flax marketing have changed significantly in the past few years. Basically, Europe has been replaced by China as our big import customer, domestic use is taking a bigger portion as human and animal health applications proliferate and we now have competition from Eastern Europe.
Charts suggest that Canadian flax prices tend to drop during the October, November and December window. They also show that flax is currently trading relatively rich, compared with canola.
Prices are down from last winter. Legumex Walker is paying $13.50 per bushel delivered in Saskatchewan and $14 in Manitoba.
This is a bit more than a normal Manitoba premium but a vessel is loading at the moment in Thunder Bay, Ontario. The company is still mostly taking precontracted flax with November and December delivery on new business.
Elevator delivery may be mildly tricky because of Triffid testing. Most elevators require that a sample be tested before any delivery.
The elevator will handle things for $100 with a two-week turnaround. If Triffid is present, the flax goes to the U.S. If the flax is “clean,” it can go into any market. Both kinds bring $13.75 to $13.80 per bushel in southern Manitoba. Elevators now, however, need two bins for flax.
Oats have been in a massive bear market through harvest but the worst is probably behind us. The average delivered elevator price in Manitoba fell from $4.32 per bushel in June to $2.95 spot. A good oats crop coincided with good everything crops, storage space was at a premium and prices were attractive. Off-combine deliveries were huge.
The trade also has limited storage and reacted to the heavy deliveries with lower prices.
Corn isn’t likely to provide much support to oats in the short term but oats fundamentals are different. Contrary to corn, the oats carryover next summer will be fairly tight.
November canola futures are consolidating at the $480 area after dropping nearly $50 per metric ton. Harvest is in the final stages and the futures markets spreads are trading at full carry.
The oilseed complex will digest the U.S. soybean harvest in the next month. The crop will be similar in size to last year. Expect harvest pressure to weigh on the bean complex, especially on soymeal. The November March soybean futures spread is trading at a 23 cent inverse telling the soybean farmers to sell their beans now, rather than store into March when the South American harvest comes on stream.
Canadian canola crop projections now exceed 17 million metric tons. This crop continues to get bigger and the market is functioning to encourage demand. Canola oil is trading at a discount to soybean oil in U.S. markets.
The feed barley market has significantly lower domestic demand. Cattle on feed in Alberta and Saskatchewan is 630,000 head, down 6 percent from last year but down a whopping 17 percent from the five-year average. Major feedlots are covered for October and November for barley and feed wheat. Cash barley in feedlot alley traded at $176 per metric ton delivered last week, down $4 per metric ton; the top price for feed wheat was $193 per metric ton. Recent rains in Western Canada on 25 percent of the wheat crop increased feed supplies.
Export barley prices remain under pressure because of larger production from all major exporters. The European barley crop is 59 million metric tons, up from 55 million metric tons in 2012; Australia, Russia and Ukraine all had larger crops.
Major importers have also increased production. Most have their requirements covered until January. The domestic Canadian barley market has limited downside from current levels as harvest winds down.
Major barley exporters have increased production. The malt barley premium over feed barley dropped to historically low levels. French malt barley traded at a meager $8 (U.S.) per metric ton premium over feed barley last week. Malt barley demand is the same every year. A small increase in supplies has a large effect on price.
Export business is quiet as Canadian offers remain near $275 (U.S.) per metric ton freight on board Vancouver. Bids are closer to $250 (U.S.) per metric ton. Canadian companies are slowly receiving sales commitments from farmers at the lower level, which will allow them to make sales for January forward.
Ocean freight values have increased in the past couple months. The strength is fueled by demand for larger vessels that carry iron ore to China. Panamax vessels that carry grain received spillover strength and this has also trickled into smaller hand-size vessels. Higher ocean freight rates have weighed on export buying ideas for both feed and malt barley.
Editor's note: Duvenaud is the publisher of the Wild Oats Grain Market Advisory. For a sample issue, either call 1-800-567-5671, e-mail email@example.com or visit canadagrain.com.