(Resource News International) — Expectations for a large Canadian flaxseed crop should weigh on prices and should eventually put the product at a discount to canola.
In production estimates released Tuesday, Statistics Canada pegged the 2009-10 Canadian flaxseed crop at 915,000 tonnes, which would be up from 861,100 tonnes the previous year.
Early market expectations had been for a slight reduction on the year given some of the adverse growing conditions, with Agriculture and Agri-Food Canada recently pegging the crop at 810,000 tonnes.
Cash prices for flax delivered to the elevator can currently be found around $9.50 to $11 per bushel, depending on the area, according to the latest data from Prairie Ag Hotwire. The best bids were in Manitoba, while in Alberta the top-end price of $9.55 is already below the best canola bids in the province.
“I think the flax balance sheet looks pretty negative compared to canola,” said Jerry Klassen, a Winnipeg-based market analyst and trader.
The state of the global economy, together with the expectations for burdensome flaxseed supplies, should cause flaxseed to lose its premium over canola, he said.
Klassen expected flaxseed would hold its value through the fall period, which is a seasonally strong demand period for the commodity, before drifting lower.
Flaxseed merchants have also pointed out that cheaper priced flaxseed from the Black Sea region is already displacing Canadian exports to Europe, putting further pressure on prices.