Flax prices on the Winnipeg Commodity Exchange topped $400 a tonne and climbed right on past canola last week.
It’s the first time since 1990 that flax has bested canola in this way.
On Feb. 6, the March contract closed at $416.50 a tonne, $9.50 higher than canola. May also was $416.50, up $5.90 over canola.
In one week, the March price rose $40.50.
The reason for the steep rise is that U.S. and European crushers are eager for supplies, but there has been little farmer selling.
An indication of this demand comes from the WCE’s tally of open interest.
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Open interest is the number of contracts established, but not yet liquidated by delivery or offsetting trades.
Often, open interest can signal when commercial exporters are buying futures contracts to protect themselves against price increases on the commodity they are about to move.
In January, the number of open contracts in flax hit 10,932, almost double the number in January of last year.
Short-term fundamentals for flax are good – most expect that by the end of the crop year there will be only about 40,000 tonnes in storage, about enough to fill one ship. But many analysts believe the current price has climbed beyond real support levels and a correction is imminent.
Also, although prices have soared for old crop flax, the pressure hasn’t affected new crop prices as much.
The November contract rose to $319.50 a tonne by Feb. 6, up $10.30 from the previous week, but almost $100 a tonne less than the nearby futures price.
Corn/barley split
In the feed grains sector the traditional link between corn and barley has temporarily split, the Winnipeg Commodity Exchange notes in its February bulletin.
U.S. corn got a boost from a mid-January USDA report that cut its estimate of 1997-98 ending stocks.
But barley is following a difference set of fundamentals.
Acreage in 1997 was down significantly, but a strong carry-in supply from 1996-97 meant available barley stocks were down only three percent.
Export demand is weak and world prices are dropping. Last September, U.S. barley at the Pacific Northwest was $132 (U.S.) a tonne, recently it was $117.
Also, Canadian domestic consumption is down because the warm winter allowed cattle to gain weight on less barley.
All this implies a run up in barley prices this crop year is unlikely.
