The number of durum acres projected for this year came in sharply lower than expected in the March 29 USDA Prospective Plantings Report. Whether or not that leads to better prices going forward remains to be seen.

Market reaction to the report has been mute, and prices actually moved a bit lower in some locales preceding the release, according to Jim Peterson, marketing director for the North Dakota Wheat Commission.

“In terms of current nearby prices for durum, they have actually slipped a bit in some markets,” Peterson said. “We’re down to $4.50 or lower for some elevator bids. Others are still holding in that $4.80 range. We’ll call it an average of $4.70, so we’re still holding at levels where we’ve been for most of this marketing year.”

The market had been waiting on the planting estimates to take some direction. Peterson noted the report did surprise end users as well as a lot of analysts.

“Many people were expecting only a 5-10 percent cut in planted area, but in both North Dakota and Montana producers indicated about a 30 percent cut in intended plantings,” he said. “North Dakota dropped from 1.1 million acres in 2018 to potentially only 750,000 acres this year. That’s not a record low, but it is certainly the lowest in recent years.

“Montana producers planted 840,000 acres of durum last year and are expecting to plant only 580,000 acres this year,” he continued. “With desert durum acres also being lower at 90,000 acres, which is down 25 percent from a year ago, that puts durum acres nationally at 1.24 million acres. That’s a decrease of 30 percent from a year ago and would be the lowest national level since 2013-14.

“Hopefully that will start to drive some stronger price incentives if end users are concerned about holding durum acres. Just using an average type yield on the current level of plantings, if they hold, it could potentially be the smallest U.S. durum crop since the 1988 drought year and end up somewhere in that 50-55 million bushel range for production,” he added.

But, if planting gets delayed this spring, durum may not take as large of a further acreage cut as other crops. Peterson explained that the main durum area is further north so producers can typically plant later, adding that durum is one of those crops that producers have planted later and maybe been more successful with than spring wheat with the later planting.

“We’ll see what the final numbers are and if we get some market incentive from end users and, of course, they’re going to be following Canadian numbers as well,” he said. “Their initial plantings report will come out the end of April. But I think the initial planting estimate for the U.S. indicates that current prices are nowhere in the ballpark to compete with other crop options.”

Some of the first looks at world durum for 2019 indicate some potential positives for price recovery, he noted. The International Grains Council came out with its preliminary 2019 estimate, projecting world durum production to fall by 4 percent or more due in large part to lower planted area in the U.S., Canada and parts of the European Union due to price, but also some negative production weather in parts of Morocco and Algeria. Durum production in those two countries is expected to be down 20-30 percent from a year ago.

Overall world drum trade is projected to be up by about 11 percent and world inventories to decline to more price positive levels going into next year.

“That’s more of the long-term look. There is certainly more optimism for decent price recovery,” Peterson said. “In the near term the market continues to struggle with pretty large inventories.”

USDA, in its early March survey of producers, reported that U.S. durum stocks came in at 74.1 million bushels which is up 50 percent from last year. Both North Dakota and Montana reported higher stocks. In Montana durum inventories were up 49 percent from a year ago while North Dakota durum inventories were up 52 percent from last year.

“The share of on-farm stocks is similar to last year at 44 percent, but a pretty high level of off-farm stocks meaning a very strong level of imports coming in, indicating larger inventories in mill position,” he said.

North Dakota durum inventory is the highest March 1 inventory since 2011. Peterson explained there hasn’t been a lot shipped in on-farm stocks from both North Dakota and Montana since Dec. 1, which reflects pretty slow producer selling. Montana may be a bit higher in terms of the level of producer movement since Dec. 1, but both states are below average.

“Canada also has pretty high inventories going into the planting season, so that’s kind of the dilemma for the durum market now,” he said. “It’s going to need to move higher at some point to reflect less acres and stronger world trade in 2019. But as of right now that’s not happening.”

On the demand side, U.S. exports as of March 21 are still higher on the year at roughly 17.7 million bushels which is up 29 percent from a year ago. However, that needs to be closer to 50 percent in order to reach USDA’s goal. U.S. exports to Italy are doing very well and are up 62 percent from a year ago.

In Canada, their shipments through the end of February, which is the first seven months of their marketing year, were 13 percent behind on the year with 72 million bushels exported. Morocco is their number one market followed by the U.S. Canadian exports to the U.S. are up 14 percent from the previous year whereas exports to Italy are down 12 percent.

“We’ll see what happens in the April USDA supply and demand report. But, like we said, the level of acreage decline was more than anticipated by the market and we’ll see if that draws some better price action going forward,” he concluded.

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