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Tight Canadian flax stocks keep bids strong

(Commodity News Service Canada) — Cash bids for flaxseed in Western Canada have held at strong levels and could again creep to even firmer levels as stocks of the commodity become extremely tight.

Cash bids were reported to currently be in the $15 to $15.50 per bushel range, down slightly from the $16 level due to the recent oilseed futures selloff.

“Producers continue to be reluctant sellers of flaxseed into the cash pipeline, with demand from the U.S. and China also depleting stocks at a faster than anticipated level,” said Mike Jubinville, a  market analyst with ProFarmer Canada.

Shipments to China and the U.S. have been at a higher level as end-users look to secure supply, he said. The steady export pace to the U.S. and China comes as a bonus as demand from Europe continues to slide due to the Triffid issue and the lack of labs to test Canada’s flaxseed.

An estimated five to 10 per cent of Canada’s 2010-11 flaxseed crop has been testing as “Triffid positive” and with that positive result comes a $2 to $2.50 per tonne discount, said Chris Beckman, an analyst with the market analysis branch of Agriculture and Agri-Food Canada in Winnipeg.

Producers in Western Canada have been frustrated with a lack of labs that will conduct the testing.

Canada’s flax has been under scrutiny from buyers wary of genetically-modified crops since testing in the EU in 2009 found CDC Triffid genetics in a shipment of flax from Canada.

Triffid, developed in Saskatchewan in the 1990s for tolerance to sulfonylurea herbicide residues in soil, was approved but then deregistered in 2001 without ever being sold as commercial breeder seed.

Canada’s flax industry had successfully lobbied for Triffid’s deregistration, for fear of losing its substantial export markets in Europe and other GM-shy markets if a GM flax were introduced. But after its discovery in exported flax last year, Triffid’s genetic material was found to have contaminated breeder seed of two conventional non-GM varieties.

Tight carryover

AAFC has Canada’s 2010-11 flaxseed exports pegged at 600,000 tonnes, of which 400,000 were seen heading for Europe, 100,000 to China, 50,000 to 75,000 to the U.S. and 25,000 to other destinations.

Industry data have Canadian flaxseed exports to China so far in the 2010-11 crop year in the 200,000-tonne category and to the U.S. in the 150,000-tonne area. Japan has also purchased roughly 32,000 tonnes of Canadian flaxseed, which has been unheard of based on previous purchases.

Through the solid demand base, Jubinville said, Canada’s flaxseed carryover could come in below AAFC’s forecast of 100,000 tonnes, which would be an extremely tight situation.

“We’re likely to see the cash bids for flaxseed trend upwards, especially as the supply base tightens, but at some point the end users will also look to less pricey alternatives,” he said.

Helping to keep flaxseed cash bids firm, however, will be the need to encourage acreage to the crop next spring, Beckman said.

“Flaxseed bids will need to be at a $2 to $3 premium over canola in order to secure enough area is planted to the crop,” Jubinville said.

— With files from staff

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