As 2019 was drawing to a close, a look back at 2019 indicated that durum exports were well ahead of projections for the current marketing year. That said, prices have not shown any further uptick and not much was taking place as far as new news as the market was heading into the holidays, typically a slow time for the markets.

“With durum, as we approach Christmas and the end of the year, there’s not much action in the market. If anything, we’ve probably seen a little weakening in average values, indicating that in the short-run the market is adequately covered from an end-use perspective,” said Jim Peterson, marketing director for the North Dakota Wheat Commission.

Also, there hasn’t been any significant weather issues across the U.S. or the northern durum region recently to impact the pipeline of movement from country to mills, so that hasn’t been an issue.

“On another front, we have front-loaded our exports quite strongly, but the shipping season is coming to an end, so we’re not anticipating anything significant until the early part of spring when the Great Lakes open again,” he said.

“The market is reaching a point where there seems to be an equilibrium as far as supply and demand,” he continued. “That’s not to say we won’t see sharper price moves here into the early part of 2020 because of the quality shortfalls in both the U.S. and Canada, but for the time being, average bids are in the $6.20-$6.50 range for top end milling quality durum.”

The national price index for durum has actually slipped down to $6.04 after being as high as 6.30 in mid-November. Peterson feels that “reflects a little bit of weakness.” Similarly in Canada, their values have backed off a little too.

Although prices may not be where producers would like them to be, especially to encourage them to move product to the elevator or to plant more durum next year, prices are much improved compared to 2018.

“On a positive note, we’re still running about $1.50 higher than a year ago or our harvest time lows,” he said.

From a world durum standpoint, Peterson feels the only positive of late has been a further cut to the 2019 European durum crop. Though it was not a significant reduction, that’s been the recent trend. The latest production estimate is 287 million bushels (MB) which is down from 320 MB a year ago and 360 MB two years ago.

“That’s a pretty good downturn in Europe the last couple years,” he said. “They’ve also got some quality shortfalls in Italy and Greece. Looking forward we’re hoping for stronger exports into the EU due to both quality and quantity shortfalls.

“In addition, Turkey, which is a fairly large producer of durum, had some significant production issues this year,” he continued. “Their crop is lower so their projected imports are almost double what they were a year ago, so that’s been a positive.”

For local prices, Peterson said the big issue over the next couple months will be what happens with U.S. and Canadian supplies; how U.S. domestic mills manage some of the quality shortfalls, or whether they’re going to push bids up in the first part of the year to get quality.

Looking at the export pace for both countries, through the end of November Canada has shipped out 62 MB of durum, which is 70 percent higher than a year ago. About 75 percent of their exports are to three countries – Turkey, Italy and Morocco.

Canadian durum shipments to the U.S. are down sharply. As of mid-December only 1.5 MB has come into the U.S. That compares to 9 MB last year.

“That’s quite a dramatic drop-off,” he said.

U.S. durum exports as of mid-December stand at 26 MB in sales vs. 15 MB a year ago. That’s 73 percent ahead. About 60 percent of U.S. sales have been to Italy with 20 percent to North African countries and 10 percent to unknown destinations. Peterson explained those are sales that are usually positioned overseas by some of the larger export companies, basically to get them out of the U.S. before the Great Lakes freeze over, and then find a customer over the winter months.

With that very strong start to exports, USDA came out with new supply and demand estimates on Dec. 10. Of all the wheat classes durum had the most dramatic adjustment in values or projections.

“You wouldn’t know it by price trends, we haven’t really seen prices follow accordingly,” he said.

What USDA did was they lowered potential imports from 50 MB down to 40 MB. All of that would be reductions in Canadian durum for milling. That’s almost a 30-40 percent cut from a year ago. USDA also raised potential exports by 10 MB, taking them from 25 MB up to 35 MB which would be our largest export total since 2014. 

The net effect is potential ending stocks of durum in the U.S. by June of 2020 would fall to 26 MB. That compares to 55 MB in June of this year, also a pretty dramatic decline.

“It wouldn’t take us back to historical lows, but getting back to a more price supportive level,” Peterson said. “At 26 million bushels, that would be our lowest level since 22 million in June of 2014.

“That’s obviously a positive, but we really haven’t seen a price reaction yet,” he added.

During the Christmas season and the end of the year mills do throttle back their production a bit, Peterson explained, adding that over the winter months it will be trying to balance available quality versus mill demand and trying to see what’s going to happen next year with acres.

“Most end users are hoping for a significant increase in durum plantings in the U.S. and Canada,” he said. “Plantings may rebound some from last year, but I think prices still need to go to another level higher to really stimulate significant interest in durum.”

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