As farmers move from old crop situations and begin planting the 2019 durum crop, new crop or harvest prices appear to be bolstered somewhat by anticipated smaller acreage.
“We continue to march into the 2019 crop and as we kind of slowly fade out of the old crop situation, it really hasn’t shifted the price levels or near term outlook a whole lot,” said Jim Peterson, marketing director for the North Dakota Wheat Commission.
He added that nearby cash prices at local elevators range anywhere from $4.50-$4.65 and the National Durum Index is at $4.60. That puts local prices about 20 cents below the recent highs which came in the latter part of February and back similar to prices we saw at the first of the year.
“Some harvest time price levels or new crop prices, I was surprised, are showing a bit more strength,” he said, adding they’re at $4.75 and even a few isolated bids at $5.25 a bushel.
“That’s probably somewhat of a reaction to the expected sharp decline in planted area in both North Dakota and Montana,” he said.
Those numbers that came out the end of March in the planting intentions report showed about a 30 percent cut in acres.
“I think the unexpected level of decline in spring wheat prices over the last three-four weeks may temper some of the cut in durum acres in North Dakota and Montana just because in some of those areas durum has gone back to a slight premium to spring wheat,” he said. “When all is said and done, I think it’s still a reality that durum acres will be down quite sharply this year so it’s going to put more onus on the yield that we get.”
Along those lines, Canada did come out with its survey results of their producers. That survey was taken in early April and released late in the month. Survey estimates showed only 5 million acres of durum which would be down 19 percent from 6.2 million a year ago and 10 percent below the five-year average.
“The level of production hit that Canada might take from that may not be proportional to the level of acreage decline simply because they did have some below average yields last year,” Peterson said. “If they would work back to average or even a higher yield, the production decline wouldn’t be 19 percent. Nonetheless, it adds to the building blocks for support for some stronger prices going into the 2019 harvest and marketing year because the U.S. production will be lower, and it certainly looks like Canada will be lower as well.”
Planting progress reports in North Dakota and Montana are starting to catch a little more attention. Part of that is because of wet, cool conditions which have slowed the start to planting and the recent snow storm in parts of northwest and north central North Dakota the latter part of April isn’t going to help matters. Some areas, maybe not necessarily in the heart of the durum region but close to it, received 8-10 inches of snow so that’s probably going to push back planting progress another week, according to Peterson.
The crop progress report as of April 28 showed that 4 percent of durum had been planted in North Dakota. That’s up from a year ago when only 1 percent was planted, but it’s below the five-year average of 7 percent. In Montana 13 percent of the durum crop was planted which was much higher than the 1 percent a year ago, but slightly below the five-year average of 16 percent.
“So we are making some progress but, obviously, further snow or heavy rain events that delay us further could start to be more of a market concern,” he said. “As of right now the large inventories on hand in both the U.S. and Canada are easing any major market concerns.”
Going forward Peterson said demand will be a key factor. U.S. export sales as of April 18 were at 18 million bushels which is up 23 percent from a year ago. USDA’s forecasted goal is 25 million bushels which would be almost 40 percent ahead of a year ago.
“We’re certainly going to need to see additional sales into Italy and parts of North Africa,” he said. “Somewhat disappointingly we missed out on the recent tender to Algeria. Canada was able to capture that sale. Hopefully there will be more opportunities going forward.”
Looking at Canadian exports through the end of February, they’re running at 72 million bushels in shipments which is down about 13 percent from 83 million the previous year. The International Grains Council (IGC) is forecasting Canadian exports to only be down 5 percent, so obviously they’re a little behind in sales as well. North Africa and Italy are the markets where Canada is struggling on sales and shipments.
Peterson also pointed out that shipments from Canada to the U.S. are up 13 percent from a year ago which makes the U.S. the number two export market for Canadian durum.
“That’s the big reason we have the additional inventory carryover here in the U.S.,” he said. “We’re looking at a record level of imports coming in from Canada to the U.S. market so that’s still a price depressing factor. Hopefully that will change as the year progresses because we certainly have ample stocks of our own.”
Peterson also pointed out that on the world stage the market is getting some potential positives building in parts of North Africa and Europe. The IGC’s recent numbers, which came out the end of April, call for a 4 percent decline in world durum production.
“That’s maybe not significant, but it certainly is going to help draw down inventories,” he said. “All the major players, including Canada, the U.S., European Union, Algeria and Morocco, are all looking at smaller crops this year. The only major players looking to rebound are Mexico and Australia, so we’ll see how that plays out.”
There are also concerns regarding dry conditions in parts of Europe. Morocco’s crop was dry as well, but it has caught some recent rains so that likely helped stabilize production there a bit, but below average yields are probably locked in for part of their crop, according to Peterson.
“Then we’ve got the U.S. and Canada still looking to get our crops planted, so with that 4 percent cut in production, that could grow,” he said adding that global stocks are projected to drop to a five-year low by June of 2020.
“I think that’s certainly some optimistic trends to look forward to, but until we get further into the planting season and have a better handle on what final planted acres will be in the U.S. and Canada and what planting dates will be, I think the market is going to be non-eventful just because we still have pretty good old crop inventories on hand,” he concluded.