Durum

Durum, like most other commodities, is continuing to show some strength as we start November, according to Jim Peterson, marketing director with the North Dakota Wheat Commission.

Local cash bids are up around $6 at more locales in the region.

“If we look at trends since early October, on the Minneapolis Grain Exchange Durum Index we were down to about $5.35 and now we’re up to about $5.60, so we’re starting to see some appreciation there,” Peterson said. “If we compare it to a year ago though, we’re still slightly behind when we were at $6 on the Minneapolis Grain Exchange Index.

“We’ll see if the market can continue to gain traction,” he continued. “In 2019 we gained about 30 cents a bushel through the month of November. Certainly the fundamentals are there to continue to put strength in the durum market, if nothing else, just being pushed by some of the run-up we’re seeing in other wheat classes, as well as the corn and soybean markets. Compared to some of these other crops, durum price appreciation has been less.”

Looking at the durum fundamentals, what’s driving prices in the U.S. is still very strong domestic demand, according to Peterson.

“Mills are running close to six days a week. With the unfortunate spike in COVID again across the U.S. and some partial lockdowns and discussion of maybe even a further tightening and maybe more in-home isolation, I think domestic mills are gearing up for continued strong in-home pasta sales,” he said.

USDA’s latest supply and demand estimate still has domestic food use at 86 million bushels (MB) in 2020, which would be similar to last year and that would be a record high.

“The previous time we hit 86 MB was back in 2006-07, before we had a lot of the anti-wheat diet fads that came into the U.S.,” he said. “That’s certainly a positive and we’ll see if that continues.”

On the international demand side, as of mid-October, the U.S. has sold 20 MB in exports, which is slightly ahead of last year. USDA is forecasting that U.S. exports would be down 30 percent this year, dropping from 42 MB to 30 MB by May 2021.

“That implies we may see a drop off in exports as the year progresses, or USDA may have to revise their projection higher as we go through the winter,” he continued.

Thus far, Italy continues to be the dominant buyer with about two-thirds of U.S. exports going there. The U.S. has 5 MB that are registered as unknown, which is up from 3 MB a year ago. The next big area of demand is Central America, where exports are more than double the pace of last year, but still are at fairly small levels when compared to Italy.

The big markets that are still absent are in North Africa. Algeria, Tunisia and Morocco still have yet to register exports from the U.S.

“If we look at some of the world projections, import demand is projected higher in North Africa so hopefully they will take over any let-up we might see in Italy through the next few months and then we can get some sales registered to North Africa before lake freeze-up in December and January,” he said.

As it always seems to be with durum there is a vacuum of news, or very little new news coming into the market. Canada has wrapped up its harvest and really has no issues with this year’s crop. Protein in their durum crop seems to be close to average, so it appears they won’t have any major quality issues this year.

“I would anticipate an acceleration in exports from Canada. As of now, the only export data we have for Canada is for the month of August, which is obviously pre-harvest, and during that period they were about 25 percent behind on year-to-year exports,” Peterson said. “If we look at some of the rail movements and rail car loadings in Canada through October, they’ve really ramped up movement of many crops, so I would anticipate more exports from Canada in the next few months unfold.”

USDA’s latest supply and demand forecast projects imports to the U.S. about 10 percent higher at 45 MB than a year ago, and approximately 25-30 MB of that would come from Canada, which would be up a little from last year. But compared to 2017-18, imports during that time were about 35 MB of Canadian durum so the projected amount is still slightly below those levels.

“In the next few weeks, the North Dakota Wheat Commission and U.S. Wheat Associates will be going out into the market to visit with customers about the Crop Quality Survey for this year’s durum harvest. We will be conducting a number of virtual marketing seminars in Europe, Central America and Asia for all wheat,” Peterson explained.

Regarding this year’s durum crop, most producers and elevator managers are aware that the 2020 crop was a very good one. About 75 percent of the samples taken during this year’s harvest survey graded number one. That compared to only 32 percent a year ago. Test weights are 62 pounds on average and thousand kernel weights are at a historical high at 46 grams. This indicates very good kernel quality.

Also, damage is only 0.9 percent, which compares to 2.3 percent last year. Vitreous kernels are at 88 percent for a crop average. That compares to 64 percent last year, so that reveals much improved color. Two-thirds of the samples made more than 90 percent vitreous.

“If there is a blemish in the crop, we do see some scattered issues with ergot and also protein levels are a little lower than five-year averages at 13.4 percent,” Peterson said. “So when we look at some of the cooked spaghetti in laboratory testing we are seeing a little drop off in cooking quality, a little more cooking loss and a little less cooked firmness. But the color is excellent, running above the five-year average.

“We certainly have a much improved crop to market this year with both U.S. and overseas customers and hopefully we’ll see that reflected in improving values for producers as we go through the year,” he added.

“A lot of that is going to depend on how aggressive Canada is over the next few months in marketing their durum crop, and if we see an uptick in North African import demand,” he continued. “We have a long way to go to replenish European durum stocks and they’re running pretty tight in the European market, so their prices are actually higher than ours. And of course they won’t get into their next year’s harvest until June, so we certainly have time on our side to see a little more tightness in the durum market.”