The durum market is still seeing some price strength, though nothing too significant, with recent bids back up to the $5 range with some at $5.25.
“The price jump was due in part to an increasing dryness area and a level of concern in the early to mid-part of June across much of northern Montana and northern North Dakota where the durum is grown and into Canada,” said Jim Peterson, marketing director with the North Dakota Wheat Commission.
“Since that time we’ve started to catch a few rain showers which have given a short-term reprieve in both Canada and also parts of Montana and North Dakota,” he continued. “Obviously, we’re going to need timelier, consistent rains, especially with temperatures predicted to crank up the end of June/early July.”
Other than that, the market is waiting on USDA’s final planted acreage report which was due out June 28.
“Certainly durum acres are much lower across Montana, North Dakota and Canada, but the question is, how much lower?” he asked. “The final acreage report will give us a better idea of that, although the delayed planting in areas may have made some of the early June survey responses more questionable, but I think we’ll have a pretty good idea. And if it confirms what the March survey was showing, which was a 30 percent cut in acres, I think the market is certainly going to have to be more responsive to weather issues.
For many months the market has been focused on the significant levels of old crop inventory to cushion us.
“But with that small of an acreage base, and potentially well below average yields, if drought conditions prevail again in July and into August, that certainly changes the picture a little,” he added. “But for the time being the market seems to be content at current price levels.”
Looking at the world durum situation, harvest is just getting underway in southern Europe and North Africa. Algeria is said to have a pretty good crop as they’ve received timely rains in April and May so their production estimates will probably grow a little which is price negative.
On the other hand, Morocco suffered an extended period of lack of rainfall so they’re seeing their production to be a bit below expectations so it’s likely there will be higher imports into Morocco.
Algeria, Peterson noted, will be more questionable and that primarily will be over quality. Typically when Algeria has above average yields they suffer lower vitreous counts as well as lower protein and typically need imports to upgrade that.
The world durum crop overall is still projected to be about 4 percent lower than a year ago. The sharpest cut is in the U.S., which is down 24 percent in potential production. Canada is projected to be down about 8-10 percent and the European Union down 5 percent.
“We’ll see how the rest of the European harvest goes as they’re also projected to hit a hot spell at the end of June into early July,” he said. “While harvest is commencing, and that type of weather is favorable for harvest, any of the later maturing crop could suffer some yield and maybe some test weight losses.”
But the positive of the world situation is that global stocks by June of next year are expected to drop to a 5-year low, according to Peterson.
“In the interim, the U.S. export sales pace as of June 13 indicate we have 8 million bushels of durum sales on the books,” he said, adding the vast majority of those sales are split between Italy, Nigeria and, surprisingly, Algeria, who does have a little bit of sales recorded. Other than that sales are still pretty limited.
Canada’s durum sale levels from August through April, which is three-quarters of their marketing year, stand at 121 million bushels on the books. That compares to 110 million a year ago at that time, an increase of 10 percent.
Canada’s big markets include Algeria and Morocco as numbers 1 and 2 while the U.S. is number 3. Canadian sales to the U.S. are at 20 million bushels which is an increase of 10 percent over the previous year. Canada is also making some progress into Italy where sales are up about 30 percent.
Going forward the market will be watching the weather and crop conditions.
As of right now, the dry stretch is starting to raise concerns with the Montana crop. Some of the northwest North Dakota durum crop and northeast Montana, for example, have dropped to only 40 percent good to excellent as of June 23. The previous week, 51 percent was rated good-to-excellent, and last year at that time 55 percent was rated good-to-excellent.
“So these rains we’ve gotten certainly have been helpful, but it kind of indicates the crop is just nip and tuck for moisture,” he said.
“In North Dakota the durum crop is still sitting at 70 percent good to excellent which I think may be a little bit overrated,” he continued. “I think we have more moisture stress, but we’ve got some recent rains.
“Of course, the big picture going forward is the crop is a little behind normal, so if we hit a cool July that would be beneficial for maintaining crop condition, but it also put us further behind in crop development.”
For example, the crop is only about 90 percent emerged in Montana. Typically they’re closer to 100 percent at this time. In terms of boot stage which is a pre-heading stage, the crop is only at 10 percent at that stage in Montana compared to 27 percent normally.
North Dakota durum as of June 23 was 50 percent at the jointing stage. A year ago at this time it was at 75 percent.
“So the crop is certainly behind in development,” he said. “The hot weather will help push that, but we’re going to need some rain along with that.”
Other than that those are about the only developments in the durum market. The updated acreage report will come out the end of June and the first supply and demand estimate from USDA will come out in mid-July.
“The big factor to watch is what happens with inventories. We started this year’s crop with 60 million bushels in inventory which was the highest level in a number of years,” Peterson said. “Depending on production and imports and, of course, demand, hopefully we can see that drop back down to 40 million or so by next year which would be much more price positive for producers as the year unfolds.”