Durum

As the U.S. has hit the half-way point of durum harvest, the market is seeing a little weakness.

“Prices have fallen back to that $5.25-$5.75 range with an average of $5.50,” said Jim Peterson, marketing director with the North Dakota Wheat Commission. “Prices have dropped down by 30-40 cents since mid-August. Some locales are even seeing more pressure than that.”

What’s driving it is two factors, according to Peterson. One is obviously harvest, and there has been no real negative yield or quality reports through the harvest.

“That’s not to say that there’s record yields and no quality issues whatsoever, it’s just relative to 2019 when we had all kinds of quality issues and sluggish harvest,” he said. “We don’t have that this year and we’ve had pretty steady harvest progress.”

Peterson also explained that any quality issues have not been real deep or widespread. However, there are certainly pockets that have caught rain at the wrong time when it’s ripe and there’s been loss of some color. He also noted some areas are seeing issues with Fusarium and probably some lower protein on some of the durum that was higher than average yield.

“But, for the most part, it seems to be a pretty good quality crop overall,” he said. “We’ll be able to meet vitreous and protein specifications with the vast majority of customers.

“There may have been a little more producer selling on durum versus spring wheat, as well, just considering that even though the durum price isn’t attractive from a historical standpoint and relative to hard red spring wheat, it still a dollar and at a time was probably $1.40 higher,” he added.

The “big gorilla in the room” is the Canadian durum crop, which looks to be quite large. Stats Canada recently came out with updated production estimates on Aug. 31 and pegged the crop at 255 million bushels (MB) with potential yields in the mid-40 bushels per acre range. That compares to last year’s production of 180 MB and represents an increase of almost 40 percent.

“Some of the early mid-summer estimates were in that 220-225 MB range, so this is even higher than early estimates,” he said.

With that said, there are some caveats to the Canadian crop, Peterson noted. Only 15 percent of the crop was harvested; some of the hot, dry weather that the Northern Plains experienced throughout August, Canada did as well, and that may have taken off some of the yield from some of the later maturing portion of the crop.

That Stats Canada report was based on conditions as of the last part of July, he pointed out, so that’s probably going to be the high water mark for their production estimate for the year.

“But we can’t get around the fact they’ve got a pretty big durum crop,” he said. “What the quality is going to be – that’s still to be determined.”

Short-term weather forecasts call for cooler weather, but not overly wet, still harvest in Canada is likely going to get stretched out. Whether or not there will be quality issues, only time will tell.

Similar to Canada, while yields looked pretty promising earlier in August on some of the later portions of the northern U.S. durum crop, producers have seen crop condition ratings decline in both North Dakota and Montana and that’s due to some of the impact from some of the hot, dry weather, as well.

With the U.S. wheat harvest, the most recent National Agricultural Statistics Service estimate had Montana at 46 percent complete and North Dakota at 54 percent as of the last week in August. That’s nearly double the pace for both states from a year ago. North Dakota is right near the five-year average and Montana was running a little behind, but nonetheless, that’s good to be essentially half done with harvest by Labor Day.

Peterson also noted there hasn’t yet been a lot of samples that have come into the North Dakota State University lab for analysis to get specific values on vitreous, test weight and protein, but from what producers and market channels are saying, there are no significant issues and based on market trends that seems to be correlating with that.

“Going forward, we’ve got some positives that hopefully can lend some support to durum prices once we get through the bulk of harvest,” he said. “Depending on how much pressure prices see over the next 2-3 weeks will determine how big of a rebound we need to get back to where we were mid-summer.”

Some of those positives include the fact the world durum crop did not increase as much as anticipated due to very dry conditions in parts of North Africa and parts of Europe. In addition, Peterson said Europe had some quality issues so they’re going to be looking for more durum imports and that’s certainly a positive the further the market year progresses. Obviously, the U.S. will have to compete aggressively with Canada for those sales.

“Algeria is looking like they’ll need twice as many imports as they did a year ago,” he said. “Morocco is also looking for more imports and the European Union right now is projected to be steady with a year ago, but I think they’ll probably work higher as the year goes on.”

Looking at the current export pace, the U.S. is running about 4 percent ahead of a year ago for export sales with 17 MB sold as of mid-August. That compares to 16.2 MB last year. Over 60 percent of those sales have been to Italy with 30 percent registered to “unknown.” Typically those unknowns are positioned for somewhere in Europe, according to Peterson, just not registered to a specific country yet. Some of the other markets making up the balance of sales include Portugal, Spain, Guatemala, Mexico and Panama.

“So we are starting to get some sales on the books,” he said.

Another positive based on USDA’s most recent supply and demand report is that USDA is calling for back-to-back years of record domestic food use of pasta in the U.S.

“With a lot of the uncertainty associated with the coronavirus, some shut-downs and some schools getting back full-time and others not, there’s obviously a lot of unknowns,” he said. “But since Jan. 1, 2020, pasta sales have been very strong and based on USDA’s projections that should continue this year, so we expect pretty strong domestic mill grind which is supportive to prices.

“Other than that we’ll just ride out the balance of harvest and see what the final yields and quality come in like,” he concluded.