Durum

As producers get further into this year’s durum harvest, the market is keeping a close watch on what kind of yields and quality are coming off the fields. And, as is typical, harvest progress is putting pressure on durum prices.

“We’re starting to get a little deeper into harvest and kind of peeling back what’s out there for the crop,” said Jim Peterson, marketing director for the North Dakota Wheat Commission. “For the most part, we’re seeing pretty good quality. Yields, obviously, are variable with some of the earlier planted crop seeing below average yields.”

Peterson explained that producers who are located in more intense drought areas were seeing some 15-20 bushel type yields, while other parts that are getting into harvest are closer to their long term averages on yields.

“I think, in general, most yields are coming in at or maybe slightly above expectations,” he said. “We’ll see what happens through the balance of harvest and if we come in with a lot of above expectations for yields. There’s certainly better looking durum from a yield potential perspective. Some of the later plantings were able to take more advantage of the late June/early July rains.”

Peterson noted that the latest National Agricultural Statistics Service estimate of harvest progress indicated 13 percent of harvest was complete in North Dakota and 20 percent was complete in Montana as of mid-August.

“Compared to a year ago, the pace in both states is about double what they were last year, so that’s certainly a positive considering what we went through last year with the rains in late August and early September and a real sluggish harvest,” he said. “Hopefully we can get a good portion of the crop off if we were to get into that type of scenario again this year.”

As is typical during this time of year, with harvest comes a little bit more pressure on prices. Since late July prices have dropped about 50 cents a bushel in overall U.S. values, according to Peterson. Most bids from northeastern Montana and into the durum regions of North Dakota range from $5.50-$5.85.

“We’ll see if there’s some additional weakness as more harvest progresses, especially if we have no real quality issues or no major surprises with sharply lower yields,” he said.

On a positive note, national durum prices a year ago were in the mid to upper $4 range, and even though there’s been some pressure, prices are still higher than a year ago at this time. And relative to spring wheat and some of the pressure on prices in that market, durum bids seem to be holding up a bit better.

“Certainly trends in the overall U.S. corn market, as well as the wheat market, will influence durum prices to some extent, but as of right now, there has been less intense pressure on durum prices,” he said.

As far as new information, harvest is the most important and what producers are getting from their fields in terms of yields and quality.

Peterson also noted that USDA came out with some updated production estimates for the various crops on Aug. 12, which had a little bit of a surprise in that the agency raised the expected durum yield in Montana from 34 bushels per acre in July to 38 bushels in August.

“It probably wasn’t a surprise as to how much it raised it, but just the level of increase,” he said. “It’s still running below last year’s record yield of 43 bushels per acre. We’ll see as Montana gets further into harvest whether they can hold to that higher yield estimate compared to July.”

Similarly, in North Dakota, USDA raised the expected yield from 35 bushels per acre in July to 40 bushels in August. That’s still below last year’s average yield of 42.5 bushels per acre.

“There’s no doubt that the late June rains and that early July weather helped increase potential yields. Whether we’ll see those yield across the board hold, only time will tell,” Peterson said.

With more planted area in 2020 and the expected higher harvested ratio, overall U.S. production is pegged at 62 million bushels. That’s up from 54 MB a year ago – a 15 percent increase.

Also on a positive note, USDA adjusted their supply and demand numbers, raising expected usage from 108 MB in July to 119 MB in the August forecast. That helped offset the increase in expected production which took stocks lower to a now anticipated 36 MB in carryover in June of next year compared to 40 MB anticipated a month ago.

On the demand side, USDA raised domestic use by 6 MB and potential exports by 5 MB. That pushes the export estimate to 30 MB, but still well below last year’s very strong pace of 42 MB.

“Some of that increase from a month ago is a reflection of what’s happened with the world durum crop,” he said. “Parts of Europe went through a pretty extensive dry period in the middle of the growing season, which cut into their potential exports and may actually result in higher import needs, which benefits Canada and the U.S.”

Looking at the current export pace, the U.S. has 14.5 MB in sales on the books, which is down about 7 percent from last year. Somewhat disappointing is that the U.S. has no sales into North Africa, which was expected to be a stronger importer.

Italy continues to be the leading importer of U.S. durum, but the current pace is about half of last year’s pace.

“On a positive note, we are seeing some steady to stronger export sales into Central American countries,” he said. “Part of that is due to tighter Mexican durum supplies. That’s not just a one-year trend, that’s been happening the last couple years, so it’s good to see stronger sales there. Hopefully we’ll see some North African business come in over the next couple months.”

One thing that Peterson feels all commodities will face once we get into the October/November time period is higher rail costs and tighter availability in railcar supplies due to strong soybean and wheat sales on the books to China.

“We’ll see if that impacts any trends in export sales in other commodities due to that expected tightness in the rail market,” he said.

Going forward, the balance of the U.S. harvest will be closely watched, as it will in Canada, and we’ll see what impact that will have on prices.

“We’re not expecting any major quality issues, but maybe some lower protein in some areas if yields are quite strong in some of the later planted areas,” Peterson said. “We’re hearing of some pockets of scab or Fusarium pressure, though certainly not broad across the region. And even in areas where there are some issues it doesn’t seem to be as intense as other years.

“And of course, we are hitting a dry stretch here, which is favorable for harvest, but some of that later maturing durum could have some of its yield potential trimmed as it’s trying to fill out kernels,” he added.

North of the border, Canada is just beginning its durum harvest. Thus far, they’ve had very beneficial growing season weather. The latest forecast on the Canadian crop is for 220 MB in production, a 20 percent increase over 184 MB last year.

“That’s obviously going to put additional pressure on prices,” he said.

“But again, some positives are that world demand is expected to be stronger, Canadian inventories are relatively tight, and I think U.S. inventories are tighter than what USDA’s data is showing,” he continued. “But until we get through the harvest season, one can’t rule out additional pressure on the durum market until we get a better handle on what the final production and quality will be on both the U.S. and Canadian durum crops.”