There haven't been a lot of notable changes in the durum market of late, but there is a bright spot in that prices have firmed some as harvest in the region winds down.
“Prices have firmed about 10 cents or so since the middle of September,” noted Jim Peterson, marketing director for the North Dakota Wheat Commission. “The National Durum Index is about $5.40. Bids across the region are still as low as $5.25, but we are starting to see a few more press up to that $5.75 range as harvest winds down.”
The latest crop harvest estimate, as of Sept. 20, had Montana pegged at 85 percent harvested and North Dakota at 90 percent. That compares to a year ago when only 50-60 percent of the harvest was complete, so certainly well ahead of last year.
Peterson noted that about two-thirds of the expected crop samples have been analyzed so far by North Dakota State University, which is slightly behind harvest progress, but the analytics indicate a vast improvement over last year’s crop. The average vitreous kernel count is 89 percent. That compares to only 62 percent a year ago and the five-year average of 81 percent. Test weights are at 62 pounds compared to 60 pounds last year, indicating very good kernel quality.
“The one factor that might be a little bit lacking is protein, but so far the samples are averaging 13.7 percent, which is above the market standard of 13 percent,” he said. “We are starting to see some lower protein in the later-harvested crop in parts of northeast Montana and northwest North Dakota with protein down in that 11-12 percent range. And we do see vitreous drop off at those lower protein levels, too.”
USDA was to release an updated yield estimate on Sept. 30 in its Small Grain Summary Report and Peterson said there could be some adjustment in acreage. But most of the focus will be on what final yields come in at.
“Thus far, yields have been quite variable across the region depending on planting date and how much moisture they had early in the season,” he said. “Ironically, some areas got moisture stress in August during the key kernel fill period. I’m expecting yields might come in a little lower than what the August report indicated, but there’s not a lot of confidence in where yields might go just because they’ve been so variable this year.”
Looking at market demand, USDA made no real adjustments in its September report for exports or food use, but the agency is still projecting very strong domestic mill grind. So far this marketing year, exports are running a little better than projections. Through mid-September, the U.S. has close to 20 million bushels (MB) in sales on the books. That’s up from 19 MB a year ago.
“USDA is actually projecting sales to be down 20 percent by the end of the marketing year next May, so we may actually see a drop-off in sales as we go forward, but at least through the first four months, we seem to be catching more export sales than expected,” Peterson said, adding that Italy has been the big buyer with close to 12.5 MB in sales, an increase of about 40 percent.
“I don’t anticipate as strong of a November-December demand from Italy as we did last year,” he added.
The U.S. also has a number of small markets that have purchased half a million bushels or more including Portugal, Spain, Guatemala, Panama, Venezuela and Mexico. There is also 4 MB listed as “unregistered,” which usually ends up going to Europe or North Africa, he noted.
“So far that hasn’t been registered to any country, but it is positive to see those export sales on the books,” he said.
Looking at the world durum situation, the latest report from the International Grains Council (IGC) did reduce the durum production estimate in Italy a bit further. The European crop is probably 17 percent smaller than the five-year average. That’s partially due to Italy, but also in France as their average yields were down about 20 percent from last year due to dry weather, he explained.
“If we look at the IGC demand estimate, they’re projecting a little lower trade than a year ago – which was one of the best on record – primarily due to less demand from Turkey and Nigeria,” he said.
Regarding exports, expectations for the U.S. and Australia were raised higher by the IGC from the early August estimates, which is a positive. The IGC did reduce Canada’s export projections slightly.
“We’ll have to see what happens with Australia, who won’t harvest until November, but their production could potentially be a 9-year high,” he said. “They’ve obviously suffered 2-3 years of drought, so they’re coming from a fairly low level. Nonetheless, they will provide some added competition this year.”
North of the border in Canada, there has not been a lot of data regarding the quality of this year’s durum crop, according to Peterson, but based on market trends and prices there hasn’t been a significant shift. He said that probably indicates a decent quality crop that’s being harvested in Canada where harvest was about 90 percent complete, which is about 20 percent ahead of their long-term average.
A new production estimate from Canada won’t be released until December, but the IGC is implying a slightly lower yielding crop than projected in August, perhaps down by 2 bushels per acre than what was projected due to some late season heat and dryness that may have taken the top off the crop, Peterson explained.
“Even though our prices haven’t shifted a whole lot, we are seeing some firmness to prices in Europe. We also expect demand from North Africa to start developing here and hopefully the U.S. can capture some of those sales in addition to Canada,” he said.
“We’ll see what happens going forward. I think producer sales, if we do see an uptick in prices, may pick up a little bit just because durum is at a premium to spring wheat,” he continued. “But right now, producers are busy with fall field work and taking off soybeans if they have them, along with other preparations for next year’s season.
“But, like I said, it’s good to see a little strength in the durum market even though it’s minor. We’ll see what happens as we go through the month of October.”