Flax markets strongWINNIPEG, Manitoba — Flax markets are strong. Prices have held their own all winter, even while most crops sagged under the pressure of transportation constraints.
By: John Duvenaud, Agweek
WINNIPEG, Manitoba — Flax markets are strong. Prices have held their own all winter, even while most crops sagged under the pressure of transportation constraints.
Even now $16 per bushel delivered is available for premium quality. Elevators are about $14.30 per bushel on flax with few constraints on delivery.
Expect new-crop plantings to be sharply above last year. AgCanada pegs them at 1.7 million acres, up from just more than 1 million acres in 2013.
There’s no special shortage of flax. The carryover this July will be 125,000 metric tons, up from 71,000 in July 2013. The carryout at the end of the current crop year is likely to be closer to 200,000 metric tons.
New-crop prices of $11 to $12 per bushel have been available through winter and spring and, if this crop gets planted, prices will gradually ease off to the lower level.
Canary markets calm
Canary trade is quite uneventful. Demand is steady and farmers are delivering adequate supplies to keep processors working.
The restrictive Mexican weed-seed count situation remains an issue, but processors have long since adapted their operations to allow them to meet the rigorous standards.
AgCanada had pegged 2014 plantings at 245,000 acres, up from 219,000 last year. But both wheat and durum markets strengthened significantly in the past two months and actual canary seedings will probably be smaller than that. Current prices are at 20 cents per pound.
Spot prices are moving higher at the moment with 21.5 cents Prices should stay firm through seeding. After seeding, there will be a move to clean up old crop, and that might pressure spot bids.
AgCanada projects the canary carryover to be a rock bottom 5,000 metric tons, but there are probably 75,000 metric tons of unreported canary in western Canada.
We continue to forecast a record canola carryout more than 3 million metric tons and producer selling will surge after seeding is completed. Basis levels are quite reasonable in the country system, but are expected to erode later in June. Second, July canola futures continue to trade at a premium to the November contract, which tells you not to hold old-crop canola into new-crop positions. The function of the canola market is to encourage demand so as we move closer to July delivery the July contract will trade at a discount to the November contract.
Canola has received spillover support from the bean complex. U.S. soybean stocks will be down to pipeline levels at the end of the crop year and historically strong meal values are contributing to the stronger soybean prices. But demand for soybeans and meal will ease late in the crop year. Once soybean seeding is finished and the crop develops under favorable conditions, the market will start to factor in larger new-crop supplies. Once the soybean market turns over, canola has potential to come under extreme pressure. Palm oil values are at four-month lows and vegetable oil values continue to grind lower. This will result in weaker domestic canola crush margins over the summer months. Soybeans and soymeal are very vulnerable to a sell off.
We are closely watching three major factors. First, the Russian winter and spring wheat growing areas are dry, and the next two weeks are critical for crop development. The forecast calls for Russia to experience a dry June, which will sharply deteriorate crop prospects. Black Sea origin wheat is the most competitive on the world market and weighing on U.S and Canadian values. Second, the U.S. hard red winter harvest will occur three weeks behind normal because of later germination.
We could see another push higher in the wheat complex if yields come in lower than anticipated. Finally, weakness in corn has contributed to softer wheat values as the floor price drops.
Currently, the U.S. corn crop is developing under favorable conditions and there is no concern about the later seeding. Given the lower corn acreage, the market has potential to incorporate a risk premium if adverse conditions materialize later in June. This would result in higher wheat values.
North Dakota and Canadian spring wheat production will take center stage in June and July, but the market is currently factoring in above-average yields. Recent rains in France and Germany have potential to deteriorate quality after a dry spring. The forecast is for additional precipitation and this could enhance demand for Canadian high protein western red spring wheat.
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 email@example.com or visit canadagrain.com.