Movement of flaxseed from the Prairies may be showing signs of slowing, with competition from Black Sea supplies and talk of Chinese contract cancellations taking place at a time when Canada's 2015 production estimates are likely to be revised higher in Statistics Canada's Dec. 4 report.
The current Statistics Canada estimate for 2015 for Canadian flax production is pegged at 889,000 metric tons, up 1.9% from 2014 and would be the largest production since 2009. Since this estimate was released, the Government of Saskatchewan has pegged the average provincial yield at 23 bushels per acre or 12% higher than the current Statistics Canada estimate of 20.5 bpa. Such a revision would add a further 89,540 metric tons to total production, leaving Statistics Canada's harvested acre estimates unchanged. Given this scenario, total Canadian production estimates could rise to 978,540 mt, the largest since 2006/07.
Current Agriculture and Agri-Food estimates have pegged the country's export potential at 800,000 mt this crop year, up 13% from 2014/15 and would represent the largest exports since 1997/98 when 917,700 mt was shipped. This comes at a time when the USDA is forecasting 2015/16 ending stocks of major oilseeds (excluding flaxseed) to grow by 2.8% to a record 94.12 mmt, well above the three-year average of 79.3 mmt, suggesting an increasingly challenging environment for all oilseeds.
Movement in the first 13 weeks or first quarter of the crop year could be viewed as a concern. As of week 13, exports from licensed elevators/terminals totaled 36,300 mt, up 2,500 mt from the same period last year and slightly higher than the average for the past three years. At the same time, commercial stocks were reported at 90,300 mt for week 13, slightly higher than last year and roughly 25,200 mt higher than the three-year average for this time. Of this volume, 69,000 mt or 76% is reported in primary elevators on the Prairies, also well above the three-year average.
In-transit stocks on rail reported for week 13 totaled 9,900 mt. This volume is down 9,000 mt or 48% from the same week last year and also well below the 19,137 mt three-year average.
AAFC's most recent October estimates suggest a 100,000 mt carryout for 2015/16, up 3.2% from 2014/15 and a four-year high. A combination of the possibility of an upward revision in Canada's production, contract execution issues in overseas markets and the current slowing pace of movement suggests that ending stocks could be revised sharply higher, with overall weakness in oilseed markets adding further challenges for the flax market.
The most recent prices reported by Saskatchewan Agriculture indicated delivered Saskatchewan elevator prices are at $456.18/mt, or $11.59/bu, down from the August crop year high of $529.65, or $13.45/bu. There's strong headwinds affecting this market and further weakness may be expected.
Cliff Jamieson can be reached at firstname.lastname@example.org
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