With durum, we’re in the middle of the growing season and there’s not much price action taking place in the market. In fact, it may be a little weaker in some locations, but on average most bids are still holding in the $6 range.
“There’s not a lot of producer selling right now as they’re waiting to see what happens with the rest of the growing season,” said Jim Peterson, marketing director with the North Dakota Wheat Commission.
As the middle part of July rolled around, the majority of the crop was headed out. Peterson noted that producers are busy monitoring for Fusarium pressures.
“Early on, we couldn't buy a rain in a lot of the durum area, but since the end of June we’ve been in a more frequent rain pattern,” he said. “That has been welcomed and helped to stabilize yield and production potential and probably even improve production potential relative to the latter part of June. But it’s also brought some increased disease pressure. We’ll see what happens over the next few weeks. This is a critical period to get diseases in check.”
In some areas that were planted earlier, like the southwestern part of North Dakota and some in the northern region, they were impacted by June heat and an extended dry period that did hamper yield potential as there was smaller head size and thinner plant counts.
“But the recent moisture may help with added berry fill,” he said. “If we can get a few more kernels per head, that will help, but it’s still going to be difficult to recover in some of those areas that were impacted by the June dry period.”
Looking at crop condition, the most recent report shows that Montana’s crop is rated 40 percent good-to-excellent, as of July 12, and the North Dakota crop was pegged at 69 percent good-to-excellent. The latter part of June those ratings in North Dakota were below 50 percent, so certainly the rains have helped the crop improve a little, but the decline in Montana’s condition bears watching.
USDA recently released its first production estimate for the U.S. durum crop and pegged the North Dakota crop at 35 bushels per acre (BPA), and Montana’s at 34 BPA. Looking at the final yields from last year, those estimates are about 20 percent lower than a year ago, but 2019 was a record setting year for per acre yield.
“It stands to reason we’ll be less than last year, based on some of the weather stresses this year, but some feel North Dakota’s potential is higher than the July estimate,” Peterson said. “One certainly can’t rule out that they’ll probably increase some of those yield estimates in the August report, depending on how disease pressures go.
“With the acreage estimate that came out in June, if you apply those yields to those acres, we’re looking at a 20 million bushel (MB) crop in Montana and roughly a 27 MB crop in North Dakota,” he added. “Compared to a year ago, North Dakota’s crop is slightly larger and Montana’s is slightly smaller.”
Overall, U.S. durum production is pegged at 56 MB, including desert durum, which is only 8 MB. That compares to 54 MB a year ago. From a U.S. perspective, things are pretty similar to a year ago.
“The U.S. did start the year with a lower ending inventory, so that should tighten supplies somewhat based on that. As is always the case, USDA seems to find some surprises or adjustments. USDA did ratchet up potential imports for next year, not all from Canada, but some pasta imports as well,” he said.
Last year, the U.S. had 41 MB imports of pasta and durum, with roughly 15-20 MB of that pasta. USDA raised that for the current year to 50 MB total, implying about 30 MB in durum from Canada. That’s going to keep total durum supplies in the U.S. at around 150 MB, which is similar to a year ago.
“Hopefully on the demand front we can see some increase that will help shrink supplies and tighten the market,” he said.
Peterson feels there continues to be some positives on the world side for support for durum going forward. World durum production is projected to be up marginally from a year ago and still well below the five-year average. Europe has had some dry periods and is expecting a smaller crop as they’re just getting into harvest now. Parts of North Africa are also looking at smaller crops.
“So, from a world standpoint, we’re seeing some underpinning of durum prices based on that and potential higher imports both in Europe and North Africa,” he said. “What happens with the North American crop here forward is important. Both the U.S. and Canada will be key to where prices go.”
Production in Canada looks to be up from a year ago both on higher planted area and better yield potential. The Canadian crop currently is pegged at around 220 MB and that’s up from 184 MB last year. But like the U.S., Canada is also seeing higher Fusarium pressures. Canada, Peterson noted, didn’t get quite as dry as the U.S. did in June and by and large they have a pretty good looking crop coming with Saskatchewan’s crop rated 70-75 percent good-to-excellent.
“It’s a matter of what happens with the disease pressure in their region and the harvest season,” he said. “It will get interesting if we have some rainy periods at harvest and challenges like we had last year.”
Canadian durum inventories have come down a lot sharper than what they have in the U.S., down about 50 percent, according to Peterson. Canadian carryovers are running less than the U.S., which is unique in that perspective.
"We’ll see what happens if they make some adjustments as the year goes on. As of right now, a lot is going to depend on their 2020 harvest, both in terms of production and quality because their inventories are historically tight,” he said.
Looking at the current export situation in the U.S., there are 12 MB in sales on the books. That compares to 8.6 MB a year ago at this time, so sales are up 40-50 percent. Italy is still the big driver as they account for 70 percent of demand, but they are more than double sales on the books compared to a year ago. The U.S. has also had stronger sales to Japan, Portugal and Guatemala.
“The next big thing to monitor is that, as of right now, the U.S. doesn’t have any sales on the books to North Africa, but we anticipate that as they wrap up their harvest and get a better assessment of prices out of Europe vs. Canada and the U.S., that region will need to ramp up their imports, and hopefully, we can catch a respectable share of that,” he said.
Still the big question with USDA’s July supply and demand report was with the 2019 crop. USDA had a negative 20 MB of feed and residual use in that report.
“We know there was increased feed use and industrial use of durum last year, due to the rains during harvest, so those numbers really don’t reconcile with this market reality,” he said. “Maybe we’ll see some adjustments as the year goes forward.”
On domestic food use, there was increased in-home use of pasta last year. USDA did show 82 MB of durum used for food last year in the U.S., which was just up marginally from 80 MB in 2018.
“If we look at this marketing year going forward, they have ratcheted that back to 80 MB, and that’s still a very strong level from a historical point, but it’s down slightly from a year ago,” Peterson said.
“A lot is going to be determined over the next two weeks, what kind of crop we’ll have going into harvest, but certainly we’ve got a better looking durum crop and production potential than we did in mid-June, although we do have more disease pressure to try to get ahead of before we hit the final stages of kernel development,” he concluded.