The durum market isn’t what one would call “exciting,” and it hasn’t been for some time. But this year’s crop, despite a late start and the fact there are fewer acres and less production expected, is looking fairly good so far.
Current cash bids were between $4.50 and $5 as of July 23. A couple weeks before there were more bids toward the $5 level, so they have slipped a little bit, according to Erica Olson, marketing specialist for the North Dakota Wheat Commission
“That’s not overly surprising as we still have bearish supply and demand numbers, and at least right now, fairly good crop conditions,” Olson said, adding that the durum crop at that time in North Dakota was rated pretty high with 73 percent in good-to-excellent condition.
“But I think it’s fair to say that with some of those earlier dry conditions and the late planting, that likely has had an impact on yield potential,” she said.
The crop is progressing slightly ahead of average with close to 90 percent of the durum headed out. However, only about 10 percent is starting to turn color compared to a third on average.
Montana is somewhat similar with about 75 percent headed out and 4 percent turning color. Condition of the Montana durum crop is a bit lower with 61 percent rated good-to-excellent.
Olson pointed out that USDA did release its first yield and production estimates. USDA pegged the national yield 3 bushels per acre higher than last year due mainly to higher yields in California and Montana. The yield estimate in North Dakota is actually lower at 38 bushels per acre compared to 39.5 a year ago.
“I think that does show the crop has been stressed a little bit and probably won’t yield as well as last year,” she said.
USDA’s durum production estimate for the U.S. is 58 million bushels which is down 20 million from a year ago and most of that decline is in North Dakota.
“One would think that this smaller production number would be price positive, but obviously it hasn’t been,” Olson said. “That’s just because of the high supplies we have from last year’s crop. Last year we had lower demand and a bigger Canadian crop that competed for domestic and export demand so we built up quite a few stocks. So our beginning stocks are 55 million bushels this year which is almost equal to our expected production.”
USDA is also expecting use to be relatively stable compared to last year.
“If you use those numbers, then ending stocks would continue to build and the estimate for this year is 60 million bushels which is the highest on in recent history,” she said. “Obviously we really need some demand to whittle away at those supply levels.
“I think the other thing is production isn’t set and we don’t know what that will be and we don’t know the quality will be,” she continued. “We also know around the world that most major durum producing countries are expecting a decline in production and stocks are expected to tighten, so we could see that situation improve a little bit, especially if we pick up some of that demand from North Africa and Europe where production is expected to be down this year.”
Looking at U.S. durum exports for the new crop year, the U.S. is higher than last year by about 2 million bushels. There have been very good sales to Italy, and decent sales to Nigeria, Algeria and Japan, according to Olson, adding that “we really need some new and substantial sales to get the market moving.”
The other thing that has tempered the market somewhat is the dry conditions in Canada that were quite concerning for a while. However, they’ve been receiving some beneficial rains and their soil moisture conditions are much improved.
“The dry conditions may have caused some yield loss early on, it’s tough to say,” he said. Looking at the latest crop condition reports from Canada, in Saskatchewan about 53 percent of the crop is rated in good-to-excellent condition and in Alberta only 38 percent is good-to-excellent, which is a bit lower than average. Canada’s current estimate is for a 10 percent decline in production this year.
A glance at Canada’s whole supply and demand situation indicates their supply levels are still fairly adequate.
“I think the big thing right now is that these durum harvests are going to be closely watched because there are some issues out there. The other big thing will be the quality to see what that ends up being,” Olson concluded.