As other wheat classes, including spring wheat and winter wheat, are riding the coattails of the corn market in its recent rally, durum is not following suit.
“Durum is probably one of the few wheat classes that has failed to follow on the coattails of the corn planting delays or disease issues in winter wheat,” said Jim Peterson, marketing director for the North Dakota Wheat Commission. “I guess that’s not overly surprising, just because with durum there’s not a lot of cross-substitution for end products and its planting area is more isolated geographically.
“But durum prices have actually slipped about 15 cents a bushel since March 1. Since May 1, we really haven’t seen any shift in prices at all,” he said, adding that prices are still ranging in the $4.50-$4.65 range across the region.
“That’s not to say it couldn’t change, because if you look at the planting progress for durum in North Dakota and Montana, as of May 20 both states were at 50 percent complete in planting which is slightly behind normal,” he continued. “Emergence is probably a bigger concern. We’ve seen some spotty emergence and certainly slow emergence. North Dakota’s durum crop was only 7 percent emerged at that time.”
Looking at other issues in the durum market, the desert durum harvest has started in Arizona and California. Most of that production, if not all of it, is pre-contracted and it’s all irrigated production so usually yields are not a surprise to the market, according to Peterson. Nonetheless, it is a variable that gets added into the mix.
Globally, Strategie Grains out of Europe recently came out with some updated durum production estimates for the EU. In somewhat of a surprise, they did lower the production estimate slightly from its earlier spring estimate, but more importantly, it is about 12 percent lower from a year ago at 283 million bushels.
“It’s based solely on lower planted area,” he said. “It’s quite dry in parts of Spain, but parts of Italy, Greece and France, also big durum producers, are faring better. It’s all simply due to lower planted area.”
Morocco continues to be quite dry as well.
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Looking to our neighbor’s north of the border, Canada is actually making pretty good planting progress with 70-80 percent complete which is slightly ahead of normal.
“The big issue for Canada is obviously there’s a trade-off. With a quick planting season it’s probably because soil is fairly dry and there hasn’t been a lot of rain to disrupt planting,” he said. “That’s something that bears watching going forward.”
As far as demand, Canada has seen an acceleration in exports whereas the U.S. has been more stagnant, according to Peterson.
“I think (Canada) has opened up some better avenues to selling durum into Italy, and Canada is always the first choice for durum for Morocco which is experiencing some dryness, so I think they’ve made a few more sales there,” he said.
Early on, Canadian exports were running behind, but are now slightly ahead of a year ago. According to data from Canada, through the end of April there was about 120 million bushels in Canadian durum sales which is slightly ahead of a year ago.
U.S. durum exports as of May 20 were at 18.5 million bushels which is up from 15 million a year ago and there was only about 1 million bushels left to ship out by the end of May.
“But USDA is projecting 20 million bushels in U.S durum export sales so we still may fall a little bit short of that projection,” he said.
Going forward, factors that could start to bring more support for durum prices would be expanding dryness in parts of Canada and even the northern counties in North Dakota for durum, and if we start seeing an uptick in global demand.
“Other than that, if there is no major weather issue, the market will probably remain fairly stagnant until we get into the end of June or when we get our final planted acreage for both Canada and the U.S. and we start to see more sales being made on what the European’s crop prospects are and if there are any quality issues,” Peterson said. “Because at some point the market is going to have to come to the reality that probably ending stocks in most key countries will be on a fairly noticeable decline compared to this year and that should bring more support to global prices.”