Durum

As producers wrap up their planting operations, durum prices have remained steady.

“We continue to hold fairly steady in the market,” said Jim Peterson, marketing director for the North Dakota Wheat Commission, adding that prices remain at an average of $6 per bushel, ranging from $5.70 up to $6.25 across the durum growing region.

“There’s not a lot of movement, but in light of the volatility in some of the other markets, or in general, some downtrends, one can view that as a positive,” he added.

Part of that is the uncertainty over what the final planted acreage number will be and that won’t be known until USDA comes out with its final planted acreage report at the end of June. Within the market, Peterson feels the thinking is that both Montana and North Dakota will have planted more durum than producers indicated in March.

“In March, North Dakota was expecting to have less durum acres than a year ago,” he said. “With the relationship between durum and spring wheat prices in April and early May, and generally drier planting conditions in the durum area, the expectation is that we’ll have a little more durum acres.”

Due to those very good durum planting conditions when topsoils weren’t overly wet, and with a lot of wind and heat in late May/early June, the big concern going forward is a need for more precipitation, according to Peterson. Although the region did catch some rains in early June, they weren’t the nice, good two-day soakers that a lot of people would like to see after the crop was planted.

“It’s still kind of hit and miss and that will probably be the market discussion from now until early July – will the precipitation pattern shift and be more frequent? This is certainly not a major drought by any means, but there are starting to be concerns to be as dry as we are this early in the season,” he continued. “Fortunately, we have subsoil moisture to work with.”

According to the latest crop progress report on June 7, 80 percent of the durum crop that has been planted in North Dakota is rated in good-to-excellent condition. Peterson noted that it’s probably more of the pastures and some of the other crops that are needing more moisture early that are having a little more impact.

Looking at current planting progress, one thing of interest Peterson pointed out is that there’s starting to be a little spread between North Dakota and Montana. In North Dakota, as of June 7, about 97 percent of the crop had been planted, which is ahead of the five-year average of 94 percent. In Montana, only 87 percent of the crop was planted, which is behind the average of 93 percent.

“Montana has maybe had a few more rains in the last week in some areas, and ironically, probably overly dry topsoil in other areas that may be impacting some of the planting progress,” he said.

As for crop emergence, in North Dakota, 77 percent of the crop had emerged compared to 80 percent on average. In Montana, only 35 percent had emerged compared to 55 percent on average.

“We’ll see as we get closer to mid-June where the numbers shake out, but I wouldn’t anticipate a lot of prevented plant for durum, even though we are beyond full crop insurance dates,” he said. “But as you hit the middle of June, you’re probably at the tail end in terms of planting.”

Looking at some of the fundamentals in the market in terms of the world durum situation, Peterson said there has been some positive developments. For example, the European crop has suffered a bout of dry conditions of late, which could impact production. At the end of May, the International Grains Council came out with its updated crop production estimate and in its report the IGC made a notable reduction in the European durum crop, going from 300 million bushels (MB) in late April to 275 MB by the end of May. That’s a 10 percent reduction in one month. The IGC also lowered the Tunisian durum crop and kept the Moroccan crop at a 13-year low in production.

World durum production at this time, even though it is still ahead of last year’s production, is down 2 percent from a month ago. The current world durum crop is estimated at 1.25 billion bushels (BB). The estimate was closer to 1.3 BB at the end of April.

With both Canada and the U.S. just finishing planting their crop, it is still not certain where final acreage numbers will end up.

“I think in both countries acres probably won’t increase as much year-on-year as many end users and traders had hoped,” Peterson said. “And then you add on to that the fact Canada is also facing relatively dry conditions in some durum regions. Both southern Saskatchewan and the northern U.S. durum region right now has a drier bias to it. How long that continues or how deep that drought might get remains to be seen. We’re not in July yet, so there’s still time to rectify it, but it probably bears watching, especially with the European crop declining a little.

“I say that because North African durum imports are projected to be up 50 percent from a year ago – 110 MB vs. 73 MB – so we’re looking at a bit smaller world production and a bit more world demand in some key areas that have been lower on demand in recent years,” he added.

Another factor for the market to consider is that world durum ending stocks are projected to hit a 13-year low by June next year. Unfortunately, to date, this prospect for tighter stocks has not really had any notable impact on prices, he noted.

Looking at current demand, U.S. durum exports as of the end of May totaled 35 MB. USDA’s goal for the year was 40 MB, so sales will end up just short of that. Also, there was a little over a million bushels left to ship, so there will likely be an adjustment to that in the June supply and demand report.

Nonetheless, Peterson pointed out, exports were double what they were a year ago.

“Somewhat positive is that new crop sales on the books, meaning from June onward, stand at 9 MB, which is nearly double the five-year average for new crop sales, so we continue to have good demand in the books,” he said.

To the north, Canada is also seeing good export numbers on their durum. To date, Canadian durum sales are 10 percent ahead of a year ago, with some big sales to Turkey and also much stronger sales to Italy. Sales to the U.S. market are down a bit.

“We’ll see what happens. Now that we’re in new crop mode, all the focus will shift more to what’s happening with crop development,” he said.

On the U.S. domestic food use side, we are at the second highest level in 10 years. Pasta sales remain strong with some of the shelter-in-place policies, although they are easing a bit now. “There are tougher economic times and historically pasta sales have been strong during periods of weaker economics, so that’s another positive for durum as we go forward on domestic consumption,” Peterson said.

“With that, I would say most durum producers are, in addition, to looking for further strength in prices, they’re looking for more frequent precipitation patterns.”