Flax prices finally break long market silence

Flax prices are beginning to creep higher in Canada and that comes as no surprise to Harold Davis, author of Prairie Crop Charts.

FOB prices jumped to $12.50 per bushel last week from $12 previously, breaking a long stretch of steady to lower prices since January.

Davis knew better prices were on the horizon partly because of what he has observed south of the border.

Elevator prices that were US$7.70 per bu. this time last year have shot up to US$9.90.

“In the course of 2017, the Americans have seen a real nice bull move in flax prices that was not at all apparent in Canadian pricing,” he said.

American prices had been in the doldrums since November 2015, hovering around the post-Triffid levels of 2009 when flax markets were rocked by the discovery of trace amounts of an unapproved genetically modified line of the crop.

But prices began to climb this year as U.S. farmers cut back on acres and drought reduced yields.

Canadian farmers have been shielded from low prices by the erosion of the Canadian dollar.

Prices hit a summer high of C$12.38, which is almost double what they were during the lows of the Triffid era.

In early September the price fell but after the price rally south of the border the elevator price in North Dakota, converted to Canadian currency, was $12.40 as of Oct. 18, which was $1 per bu. higher than the Canadian price at that time.

Davis said it is time for Canadian prices to catch up, which is why he wasn’t surprised by the rise in FOB prices.

Doron Yahav, a grain trader with Agrocorp Processing Canada, said sales to China are finally starting to heat up after a long period of inactivity as it worked through heavy stocks.

There is something about the Canadian crop that is piquing China’s interest.

“China has caught wind of the good quality this year,” he said.

“Despite rumours of them importing from other origins around the world it seems like they’re trying to kick some tires and trying to have some bids that are more reflective of what the grower mindset is.”

Yahav said damage to this year’s flax crop is minimal, the seeds are plump and are a nice, brown colour.

“China doesn’t like black seeds and so far we haven’t seen that this year,” he said.

Yahav agrees with Davis that there is potential for prices to move higher with China now in the market and growers content to sit tight.

A lot will depend on what happens with the Canadian dollar, which has appreciated by about seven percent over this time last year and on how much flax China buys from the Black Sea region.

Another factor is the size of the Canadian crop, which is yet to be determined. Statistics Canada forecasts 500,000 tonnes of production. Yahav believes average yields will be bigger than the 19.4 bushel per acre estimate Statistics Canada is using because its estimates for wheat, durum and lentils have been too low.

However, there was still some flax standing when winds exceeding 100 kilometres an hour swept through Alberta and Saskatchewan last week, which may have caused some damage. Saskatchewan Agriculture said 13 percent of the flax crop had not been combined as of Oct. 16.

Davis said another market factor to consider is flax prices relative to canola prices. The historical average sees flax selling for 114 percent of canola. These days it is at 107 percent.

Canola prices have been on a rising trend since October 2013, while flax prices have been on the decline.

“Now with the values so close to each other I think that canola’s firmness is probably going to generate a lift to flax,” said Davis.

“So I’m feeling very comfortable about the flax market.”

History shows there is often a post-harvest bump in flax prices starting around Oct. 20 and ending around mid-November.

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