2013 summer Canadian Flax Industry Update
The Benefits and Dangers of High Flax Prices
Chuck Penner LeftField Commodity Research
Old market maxims stick around for a reason: they’re tried and tested. One of the most reliable is “the best cure for high prices is high prices” and it could certainly apply to the flax market next year. Spot bids haven’t quite reached record highs this spring, but they’re certainly in some pretty rare air.
There are a couple of reasons for the recent rally. Smaller Canadian flax crops for three straight years kept supplies from rebuilding and set the stage for a decent export year to draw down inventories. In 2012/13, demand from both China and the US has been solid, but shipments heading to Europe again were the extra piece that gave the
market a real boost.
So the lofty bids raise the question: will the maxim about high prices be proved true this year? Older and wiser marketers than me will say that any time you get the opportunity to price in the top third, you should take advantage of it, for two reasons. First, it’s profitable – in this case, very profitable. Second, and more important, is that from these heights, the downside risk is far greater than the potential for more gains.