Unlike some commodities, notably corn and soybeans, durum prices have not been negatively impacted by the ongoing coronavirus pandemic.
“On a positive note, with durum we’re seeing a little lift in prices in some areas, both for some of the bottom-end durum, as well as the top milling quality durum,” said Jim Peterson, marketing director for the North Dakota Wheat Commission. “I think there’s starting to be a little more realization that stocks are going to get progressively tighter as the year goes on, even though the end-use industry, the pasta manufacturers, and the millers claim to have very good coverage all the way through June and July.
“There's not been a lot of movement, but in light of where a lot of the other commodities have been tracking over the last month or so, even a little strength is good,” he added.
Peterson pointed out that milling quality durum prices have jumped back up to $6.25 in some locales, but are still down in the upper $5 range in other locations. The average price is $5.90 across the region for milling quality.
Also, he added, feed durum or low end quality durum prices have been pushing up to $4 in some areas, which almost puts it on par with 14 protein spring wheat, so that’s been a positive.
“I would anticipate more of a pinch-point may be coming for end-users because producers are busy planting, and current prices are not very exciting to haul durum in, so they’re not going to be pressing the pipeline too much,” he said.
“With the current prices, we’re still seeing pretty good retail demand, keeping the mills running on a very strong grind,” he continued. “Even though they have coverage, is it going to be enough for the next couple months to fill those higher retail needs, because combined with that, the U.S. still has a very strong export program.”
As of mid-April, the U.S. had sold 34 million bushels (MB), and of that about 6.5 MB was left to ship. He said we will still need to see pretty aggressive loading over the next month and a half, as well as a few additional sales.
Of those 34 MB in sales, 22 MB went to Italy and 8 MB to North Africa, primarily Algeria and Nigeria, he noted, adding their sales are up 25 percent compared to a year ago.
“We’re seeing a little hint of maybe some stronger domestic pricing, as well as the possibility of further export demand and that points to at least some stability in durum prices until we get more confirmation on planted acres and what the growing conditions will be like,” he said.
As mentioned in previous articles, the U.S. planting intentions survey at the end of March included a bit of a surprise in that it showed a net decline in planted durum acres. As planting gets underway, for the most part, a lot of the region has continued to battle cool soils with pockets of ponding in fields due more to slow frost movement out of the ground than to excessive spring moisture.
“I think the frost is still moving out of the ground in some areas just because we’ve had a little bit cooler trend in April,” he said. “As the weather warms up and gets into more spring-like temperatures, I think progress should accelerate over the next couple of weeks.”
As of April 27, only 2 percent of the 2020 durum crop had been planted in Montana. That compares to 10 percent last year at that time and 15 percent over the five-year average.
“It’s not alarming yet, but we are trending a little behind,” he said.
In North Dakota, planting progress is closer to average, but still slightly behind with 3 percent planted compared to 6 percent on average.
“That will start to get more attention over the next few weeks if we continue to run behind,” he said.
For the most part, soil moisture seems okay. Even though there was a lot of very good fall moisture out in the western region, there has been a lot of wind and not a lot of spring rain, so some of the top soil is getting dry in areas. However, it doesn’t appear to be critical at this time.
“It’s probably made better planting conditions that many anticipated after the wet fall last year,” Peterson said.
The next big thing the durum market will be following is what happens in Europe and Canada.
“Due to some of the government restrictions and COVID slow down, the Stats Canada planting intentions report, which was due out the end of April, was pushed back to May 7,” Peterson explained. “We’ll have to wait to see what Canadian producers are thinking as far as spring planting. Early industry estimates are for about a 15 percent increase in planted acres.
“Just like in the U.S., Canadian producers have been battling cool soils, but it’s also getting a bit dry in some of their durum areas, so they’re going to need a shift in precipitation patterns as we get into late-May and early-June,” he added.
In Canada, Peterson said the big thing to follow is ending stocks. Right now their projections are for ending stocks to be only 35 MB, as of the end of July, which would be equal to a year ago. The last time there were two similar back to back years was in the mid-1980s. At 35 MB, the stocks would be the lowest levels since 2008 in Canada and 50 percent below their 20 year average.
“Current price levels are not reflective of the tighter stocks situation in both the U.S. and Canada,” he said, adding that in the U.S., ending stocks are projected to fall to 21 MB by June 1. That compares to a year ago when stocks were 55 MB.
“Final planted acreage in both Canada and the U.S. will be very key to determining where we go with prices because at those kinds of stocks levels we’re going to need to see some rebound in production in both Canada and the U.S.” Peterson said.
One of the reasons why stocks have been drawn down in both countries is because of strong export demand, he explained. Canada has seen very good exports to Italy and Turkey and that’s a positive for the durum market going forward.
As far as the European and world crop, the current estimates are for about a 5 percent reduction in global stocks. In North Africa, Morocco endured another dry season and so will need imports again.
The big key, he noted, will be what happens with Turkey, as well as European production. With Italy, it’s still unknown what impact the coronavirus will have.
“Just like here, they’re seeing an increase in retail demand for pasta, but with restaurants shut down and obviously tourism likely to be well below normal levels this summer, overall demand going forward is still an unknown. And the tourism and restaurant demand in Italy is obviously a big consumption point.
“So, we’ll have to watch that, but for now, farmers are busy planting. We haven’t really seen a lot of price response, but a little bit of strength is promising and hopefully we’ll continue to see more of that as we progress through the year,” he concluded.