Current Sales Position:
We are 70% sold on 2017/18 old crop flax.
We are 20% sold on 2018/18 new crop flax.
In a nutshell, there is no new news when it comes to the flax market this week, but the outlook for flax remains bullish.
This week, cash flax prices delivered to Saskatchewan elevators were sitting at an average of $12.18 CAD per bushel. This is flat week-over-week but up 7% compared to the same time last year.
To the south, the large crush plant in Fargo, North Dakota, is posting a bid of $10.20 USD per bushel (or $13.10 CAD per bushel) for August movement, unchanged from last week.
However, their bid for November delivery is pegged at $10.50 USD per bushel (or $13.40 CAD per bushel), which is up 30¢ USD / bushel on the week, indicating some stronger demand. This carry in the market should not be unnoticed.
Flax Harvest Hitting Its Stride
This past week, the USDA reported that 7% of the North Dakota flax crop is in the bin, 3 points ahead of the seasonal average. As only 1% of the crop was harvested at this time a year ago, the ND flax harvest is off to an excellent start!
Next door in Montana, the USDA said last week that 3% of the flax crop is harvested. This is a 2 point advancement over last week. However, it’s 33 points behind last year’s pace of 36% harvested, and well behind the seasonal average of 29%.
Going into tomorrow’s USDA Crop Progress report, the seasonal average for North Dakota’s flax harvest is 16% complete, while the seasonal average for Montana flax harvest is 39% complete.
From a conditions standpoint, 81% of North Dakota’s flax crop is now rated good-to-excellent (G/E), a 1-point drop week-over-week. It’s also ahead of both the seasonal average of 66% and last year’s G/E rating of 15%.
Next door in Montana, the flax crop saw a 12-point drop week-over-week: 72% of fields are rated G/E. However, this is well ahead of both the seasonal average of 51% and last year’s G/E rating of 9%.
Going into tomorrow’s USDA crop progress report for Week 33, the seasonal average shows about a 64% G/E rating for both North Dakota and Montana. We’re continuing to monitor the situation, given the increase in drought situations, especially in North Dakota: today, more than half of the state is in an extremely dry or drought condition.
Canadian Prairies Also Baking
Under high temperatures and trace amounts of precipitation, topsoil moisture conditions “have significantly worsened”, according to Saskatchewan Agriculture.
A quarter of the fields are considered to have their topsoil moisture now rated very short. With these conditions in mind, crops have either finished out and/or dried down rapidly and thus, yield and quality may be affected.
Controversial Russian Flax Acreage?
The size of Russia’s 2018/19 flax acres this year have sprung some controversy.
Grain broker Rayglen reported that flax acres in Russia are up 31% year-over-year but that is simply not true. The reality is that flax acres have been trending down going into the 2018/19 crop year.
However, what is true is that average yields are seen climbing by 12% year-over-year to 16.2 bushels per acre. This equates to a forecast from APK Inform suggesting 2018/19 Russian flax production will come in at 638,000 MT. This is about 5% high year-over-year.
Ultimately, Russian production of all grains has been negatively impacted by the dry weather there, and flax has not been immune. We watch these reports on a daily basis – there are literally 4 people on the GrainCents team doing research and only research – so we are on top of things very closely.
Flax Prices Looking Forward
In our July 8th semi-annual outlook, we said that seasonal tendency is a major factor that comes into play. For a number of crops, including flax, late August through October is when the lows are usually seen, thanks to harvest pressure.
However, with tight supplies, flax might start to see higher prices as early as September, when yields are more known. StatsCan’s production estimate on Friday, August 31st, will certainly be a closely-watched report and potentially a pogo stick for where flax prices head next.
Going forward, the crop/weather conditions and the progress of the harvest in Western Canada and the U.S. Northern Plains are expected to garner lots of attention (as usual).
We are still expecting strong demand from China, while also monitoring harvest progress and production in the Black Sea region, namely Kazakhstan since they tend to compete with Canadian exports the most.
Have a great week!
– Brennan, Garrett, Adrian, and Victor
August 13– Flax Weekly GrainCents Digest
August 5– Flax Weekly GrainCents Digest
July 29– Flax Weekly GrainCents Digest
July 22– Flax Weekly GrainCents Digest