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Published May 05, 2014, 10:00 AM

Flax market hot

WINNIPEG, Manitoba — North Dakota flax prices have been on the upswing all winter, with a 70-cent surge in April.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — North Dakota flax prices have been on the upswing all winter, with a 70-cent surge in April.

Saskatchewan prices, in contrast, weakened since fall, trading at a $3-per-bushel discount in February. Now flax is finally showing some strength. Canadian prices are surging. In the middle of the winter, you’d be doing well to beat $11.50 per bushel. Prices have improved by $2.50, mostly in April. Processors are paying $14 per bushel freight on board farm.

There’s no special evidence that a European buyer has switched orders to Canada from Ukraine, although that remains a possibility. Movement to Europe is steady, mostly in containers.

China has been a regular buyer and Archer Daniels Midland has recently been buying aggressively on the Canadian prairies and that might explain the recent strength. Canadian prices are still at a discount to North Dakota prices, so this might reflect an easing of the transportation logjam.

Warning signs are there. Resellers have entered the market with traditional exporters suddenly facing competition from people who don’t usually export. Second, a lot of flax has been sold and loaded on rail, but not yet moved. This flax will be hitting the system at some point. Finally, there’s about 60,000 acres of standing flax in Kazakhstan that is slated to be spring combined. This flax is likely in good condition.

Canada has no special shortage of flax. AgCanada places the carryover this July at 160,000 metric tons, more than double from 71,000 metric tons in July 2013.

Peas picking up

The yellow pea market was slow all winter and prices nothing to write home about. This market is improving.

You should be able to get $6 to $6.60 freight on board anywhere on the prairies and probably $6.50 to $7 delivered — maybe more. Even better, you’ll probably find a buyer who can actually take delivery with only a phone call or two.

The green pea market has heated up. It looks like we’ll run out again.

Western Canada produced more than 500,000 metric tons of greens last summer, which should have rebuilt our stocks, but a lot of that moved right off the combine into an empty global system. Green movement is still strong. The South American market is just entering its peak demand season and European buyers, who usually slow down at this time of year, are still importing.

Old crop greens are $12 per bushel. New crop has moved from $7 per bushel to $9.

Canola support

Statistics Canada estimated canola acres at 19.8 million acres, which was sharply below pre-report trade estimates ranging from 20 million to 22 million. Using an average yield of 35 bushels per acre, we are now estimating production at 15.7 million metric tons, compared with 2013 crop of 18 million metric tons. While Statistics Canada is expected to increase the seeded area on upcoming reports, traders are clearly revising their supply and demand balance sheets, reflecting a slightly tighter fundamental structure in the upcoming crop year.

In the short term, keep in mind that 2013 to ’14 carryout will be extremely burdensome, and we expect an increase in farmer selling during the summer. Despite the lower expected acreage, keep in mind the short term upside will be tempered by large supplies overhanging the market. Yield potential can also be quite variable and the market will be more sensitive to weather during the summer period. At this time, the crop is expected to get off to a good start so the price outlook is rather neutral.

The large carryout from this crop year will keep ending stocks sharply above the 10-year average for the 2014 to ’15 campaign.

Outside influences are setting a negative tone for Canadian canola values. Chinese soybean imports are sharply declining because of negative crush margins and cancellations of U.S. soybean cargoes has been a main headline. Secondly, Brazilian soybean cargoes continue to trade into the U.S., alleviating the tight soybean supply situation south of the border. U.S. soybean acres are expected to increase 6.5 percent this year and seeding is underway with favorable conditions.

Wheat acreage

Statistics Canada estimated a year-over-year decline of 5.6 percent for Canadian nondurum spring wheat acreage, in line with pre-report estimates.

Farmers will be carrying over record-large wheat stocks into the new crop year and softer prices have discouraged production. Basis levels remain relatively wide in the country system with most elevators not accepting fresh delivery contracts until July or August. Shipments out of Thunder Bay, Ontario, have been delayed by a month, which has enhanced the logistical problem that prevailed throughout the winter.

Moving stocks into export remains a challenge which has tempered any strength in the elevator bid prices. Delivery space in the commercial elevator system will remain limited throughout the harvest period.

World wheat values for new crop positions have been supported for three main factors. The tensions in the Black Sea region continue to escalate and there is concern about the export potential from this region for new crop supplies. Second, dryer conditions continue to dominate approximately 50 percent of the U.S. hard red winter wheat crop and the market is concerned over lower crop conditions ratings. Finally, world wheat carryout stocks for 2014 to ’15 have potential to drop to 173 million metric tons from 183 million.

Editor's note: Duvenaud is the publisher of the Wild Oats Grain Market Advisory. For a sample issue, call 1-800-567-5671 in Western Canada and North Dakota, 204-942-1459 for all others, or e-mail admin@canadagrain.com or visit canadagrain.com.

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