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Tight supply of flaxseed confirmed

Fears of tight flaxseed supplies in Canada were confirmed by Friday’s stocks report from Statistics Canada, which showed only 453,000 tonnes in the country as of Dec. 31, 2010, as opposed to 843,000 at the same time one year ago.

Although total stocks are very low, Chuck Penner of Left Field Commodities in Winnipeg said the market has already factored in the narrow amount of supply.

“I don’t think it was entirely unexpected. The trade is working with very low stocks already, so it seems to be the type of situation where the industry knew (stocks) were very tight and prices have already largely responded to that,” Penner said.

“I don’t think we are going to see a lot of new reaction.”

Even though flax stocks are quite low, Penner said that would not be a huge factor in persuading producers to plant flax this spring, though he expected acres to increase from the 925,000 planted in 2010, as reported by StatsCan.

“The farmers aren’t going to worry about the low stocks numbers, they’re just going to look at the bids,” he said. “We are seeing some historically very nice bids for both spot and new-crop, so it’s holding out quite well against other crops in terms of returns per acre.”

Penner said he thinks prices will see a bit of a bump with the confirmation of tighter stocks, but didn’t expect to see values go all that much higher.

“Some producers are holding out until $20 per bushel, but I’d be surprised if we get there. I think we’ll cap out probably around $16.50 to $17 (per bushel), ballpark,” he said. “Most people who have been growing flax for years know that these are very good values. The only problem is everything else looks really good as well.”

Current elevator deliveries for flax are bringing as much as $15.76 per bushel in Manitoba, $15.35 in Saskatchewan and $15.09 in Alberta, according to Prairie Ag Hotwire data.

Penner said export business will be affected by the lack of product.

“For the rest of the crop year (January to July), I penciled out that we’d be able to export about 50,000 tonnes a month, and that would take 2010-11 ending stocks down to virtually nil,” he said. “There is a point where even the Europeans will get rationed out of the market.”

Demand for flaxseed has also been coming from Asia, Penner said.

“There is a vessel in Vancouver right now that is taking 8,400 tonnes to what I expect is China. We had thought China had been rationed out at these higher prices, but they are still doing some minor buying.”

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