One of the bright lights in the grain and oilseed sector could be dimming.
Brian Johnson, general manager of commodities with Johnson Seeds, said there is a bearish factor looming in the flax market.
One of the reasons flax prices have been so good in 2014-15 is that a significant portion of the Black Sea crop was never harvested because of poor weather.
“There has been more sales to Europe because of the East European crop being left in the field over the winter,” he said.
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More than half of Kazakhstan’s crop never saw a combine, and it will be harvested and brought to market this spring.
“It could be a bit troubling,” said Johnson.
“It may damper prices quicker than we think.”
How long the late-harvested Black Sea flax weighs down prices will depend on weather conditions. A lot of flax could suddenly hit the market if conditions are suitable for harvesting.
Johnson said the flax will likely be poor quality, but it should be useable for industrial purposes.
This year’s seeded acres could be the other bearish factor. Many analysts feel it will be a much larger crop than the 1.73 million acres Agriculture Canada is forecasting, which would be an 11 percent increase from last year.
“Conservatively, I would put it at 20 percent higher,” said Johnson.
Flax prices are attractive compared to other crops because of unusually strong demand from both the industrial and human consumption markets. Most farmers were also happy with last year’s yields, he said.
Jon Driedger, risk management portfolio manager with FarmLink Marketing Solutions, also believes acres will be way up because of $14.50 per bushel old crop prices and some $12.50 bids for new crop.
“Those sorts of contracts are out there, which is reasonably attractive to growers, especially if you can get an Act of God clause on say the first 10 bu. or whatever standard terms would be,” he said.
Driedger is forecasting a 10 to 15 percent hike in flax acres because not a lot of other crops can compete with the oilseed at today’s prices.
“Canola is a little ho-hum with profitability, and (with) the cereals there is nothing that jumps out as super-exciting,” said Driedger.
“It’s not too hard to see where you coax in some flax acres.”
Growers who usually plant a few quarter sections of the oilseed might be inclined to throw in an extra quarter this year, he said.
It is a crop that tends to be seeded late, which could also prove advantageous if prices hold up through spring.
