More downside than upside for Prairie flaxseed bids

CNS Canada — Flaxseed prices remain strong in Western Canada, but that strength is relative and there are more bearish than bullish factors in the background which should weigh on values over the next few months.

Spot flaxseed bids can currently be found in the $13-plus per bushel area, while new-crop is in the $11 to $11.50 area, said Grant Fehr of Legumex Walker at Morden, Man.

The North American food sector is still trying to cover some of its needs, while China is also making aggressive purchases, he said, accounting for the nearby strength.

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While Fehr didn’t see that demand going anywhere, he was unsure how long the current values would hold up and noted prices were about $1 above where they should be.

Crude oil has dropped sharply over the past month, and commodities haven’t fallen to the same extent, he said. “Either crude is coming up, or commodities are coming down,” he said, noting he thought commodities going down was the more likely scenario.

With South America soon harvesting its soybean crop, CBOT soybean futures have more room to the downside. “Beans will drag canola, and canola will drag flax. It all goes hand in hand,” said Fehr.

In addition, Kazakhstan had a large flaxseed crop that was unharvested before the winter set in. While the yields are still unknown, there are about 400,000 hectares of flaxseed in the country that will start coming off in May, destined for the oil market, said Fehr.

Canadian farmers grew 847,100 tonnes of flaxseed in 2014, up from 723,900 the previous year and the largest crop since 2009.

Seeded area, at 1.555 million acres, was also the first time planted acreage topped 1.5 million in five years, as the crop has finally moved back to levels seen before the Triffid scare hampered export movement in 2009.

While spot bids may be headed lower, flaxseed is still one of the lower cost-of-production crops to grow, with net returns working out to $90 per acre, said Fehr. Only a few other crops pencil out better than that, he noted.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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