Durum

In somewhat of a pleasant surprise for producers, the durum market has continued to hold around the $5 per bushel range, which is up from where it’s been earlier this spring.

A couple factors have contributed to this, according to Jim Peterson, marketing director for the North Dakota Wheat Commission. 

“One is confirmation of a significant cut in acres in both Canada and the U.S. as acreage reports from the two countries came out the end of June,” Peterson said, adding that the northern U.S. durum region and the main regions in Canada where durum is produced have been some of the drier areas. “So I think maybe there’s a little more concern about yield potential on the 2019 crop for durum relative to spring wheat.”

Peterson pointed out that the $5 range seems to catch a lot of bids, but there’s probably a bit of resistance at that level just because there is still a significant amount of on-farm inventories of durum. Also, the world market is not really concerned yet about imports even though the world durum production is looking to be the smallest crop in five years.

Looking at the June acreage reports, the Canadian reports showed producers there planted 4.9 million acres, which is down marginally from the 5 million they expected in April and, more importantly, it’s down 21 percent from a year ago when they planted 6.2 million acres.

For the U.S., the end of June survey showed 1.4 million planted acres. In March, the market was anticipating 1.42 million acres would get planted.

“A year ago we planted 2.1 million acres, so we’re only two-thirds of what we planted in 2018,” he said.

Peterson also pointed out that somewhat surprising to the market is that North Dakota durum acres fell to 700,000, which was a bit lower than what they were showing in March. That’s down 36 percent from a year ago.

In Montana 600,000 acres were planted which is up from the 580,000 they expected in March, but that’s still down about 30 percent from a year ago.

“There will not be any new acreage numbers coming out until September, so I think the market and end users are realizing it’s got a much smaller acreage base to work with in both the U.S. and Canada and so yield is going to carry a lot of weight this year,” he said.

In May through much of June, the durum areas were pretty marginal for moisture, and some were actually in a drought condition, according to Peterson. Recent rains have alleviated some of those concerns and there haven’t been any excessively hot temperatures. Surprisingly the overall crop condition rating in North Dakota as of July 7 was 74 percent in good-to-excellent condition.

“I think that may be a bit high. Nonetheless, that’s number the market gets to work with,” he said, adding that in Montana, where the crop is a bit later as well as reflecting the dryness, only 41 percent is rated good-to-excellent.

“The crop is later in development, so July weather will be very critical,” he said.

“As of mid-July, the northern U.S. durum crop looks to be smaller acreage-wise, and probably looking at lower yield potential, but not a drought disaster like we could have been if we hadn’t received some recent rains,” he added.

Peterson noted some positives for the durum market that could potentially push prices higher as the season progresses is the world situation, including dryness in parts of Europe and the fact Italy looks to be a bit lower in production and Spain as well. As a result Peterson feels there will be higher imports for the EU this year. Morocco has had very dry conditions and will need to import at a higher level as well.

Looking at demand, U.S. durum exports as of the end of June were up 80 percent from a year ago with 8.5 million bushels in sales versus 4.7 million last year. The U.S. is seeing better sales to Japan, Nigeria and Italy.

Stats Canada reported export sales through the end of May were running about 11 percent ahead with 135 million bushels sold compared to 122 million last year.

“On a positive note it looks like imports from Canada have tempered a bit,” Peterson said. “They were running ahead of a year ago, but as of the end of May they looked to be about equal with last year, so we’ll see what happens going forward.”

All along, Peterson noted, old crop inventories have been a wet blanket on the market. The June USDA stocks survey confirmed that. As of June 1, there was 55 million bushels of durum in inventory in the U.S. with half of that on-farm. In June of 2018 there was only 35 million bushels of inventory on hand.

“Certainly that’s a comfort level for buyers, but I think a sign that things could be starting to change,” he said. “We are starting to see a little more pull-back from pasta companies on booking more than three to six months out simply because millers are asking for more of a premium or more of a carry in the market just because of some of the uncertainty with 2019 production.

“Hopefully some of that will continue to be carried forward to producer prices as we get closer to harvest, but the big issue still is that dilemma that we’ve got plentiful old crop inventories,” he added, “but as we progress more into the 2019 marketing year, things do appear to be getting a bit tighter.”