High flax prices have come and gone, says market adviser Mike Jubinville.
Backing him up is a new crop contract that offers $7.75 per bushel, down radically from $13 offered only a few weeks ago.
Jubinville said there will likely be one more price rally before the end of the spring, “but it will be short and over before many people will be able to react…. For those that are too greedy, holding on to any inventory now will be big mistake.”
Prices had been pushed to near record highs by short supplies resulting from smaller production in 2003 and 2004, a frost-ruined crop last fall and lower ending stocks.
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Flaxseed at the port of Rotterdam now commands about $550 US per tonne while European Union prices for linseed oil are topping $1,200 per tonne.
Analysts say buyers are pushed to the breaking point and are looking for replacements for linseed oil.
While the high prices made flax the most profitable crop on the Prairies last year, they may also be damaging longer-term market prospects as manufacturers, building contractors and retailers look for replacements.
“It may be difficult to lure them back unless prices are much, much lower and you likely will lose a few (buyers) in the process,” Jubinville said.
Production in Western Canada dropped to 517,000 tonnes this year from 754,000 last year.
At the same time, the United States harvested about 266,000 tonnes, slightly less than last year but still considered large.
Kaye Effertz, a producer from Mandan, North Dakota, and spokesperson for Ameriflax, the North Dakota producers’ association, expected increased acres next year.
“Our growers are liking flax and it’s been very profitable the past couple of years,” she said.
The higher U.S. production will further lower prairie prices in the old and new crops.
Jubinville said if the United States’ 2004 production turned out to be any higher than the projection, the U.S. could end up buying less from Canada this winter than the 75,000 tonnes it was expected to import, possibly putting the brakes on any further rally that could take place in the next 60 to 90 days.
“And next year if the trend continues, more American producers will be planting flax,” Jubinville said.
“And when supply jumps, prices will head the other way fast.”
Eric Fridfinnson, president of the Flax Council of Canada, expects more flax to be planted on both sides of the border this year.
“In 2005 in Canada we might see 900,000 tonnes depending on the price outlook of competing crops.” That would be a 75 percent increase.
Kelley Fitzpatrick of the Flax Canada 2015 initiative said seeded area should move toward more tradition levels with perhaps 1.8 million acres harvested in 2005, compared to the 1.3 million in 2004.
Her organization is working with Ameriflax to create new markets for the crop.
“It does take time to build though,” she said. “But we are seeing real prospects of diversifying those end-use markets and stabilizing demand.”
Prices for 2005 new crop are reflecting the increased supply projections, with flaxseed prices at Rotterdam around $350 to $360 US per tonne.
“When you back that off to the farm in the middle of Saskatchewan, that is $7.75 (Cdn) a bushel,” Jubinville said. “If you have inventory, sell it now. If you plan on growing flax this year and can price it above ($7.75 per bu.), it might be as good as it gets. Cash prices next fall could be less.”
