Cash prices for top-end durum haven’t varied much over the past several weeks with prices ranging from the low $6 range to $6.50 on the high-end. That means the durum market is stable.
“In some areas we have seen producer movement with the weather we’ve had lately and some producers probably needing some cash flow,” said Jim Peterson, marketing director for the North Dakota Wheat Commission. “I still think for the high-end durum producers are holding pretty tight to that.
“As far as new news in the market, we did get an estimate on Jan. 10, that 2020 desert durum plantings were up 9 percent, but still at historically low levels,” he added.
Between Arizona and California, 70,000 acres was estimated at the time of the survey to be planted. Yields in the region are usually more than 100 bushels per acre (BPA) with irrigation, so about 8 million bushels (MB) of production, he explained, adding that the long-term average is in the 12-14 MB range, so still below average. Some of the recent highs have been closer to the 19-20 MB range.
“That’s obviously an indication that prices need to be higher to entice acres,” Peterson said.
Up in the northern durum region, exports continue to be a very positive story. As of the first week of January, U.S. durum sales total 30 MB, which is double the pace of 15 MB last year at that time.
Reflecting on that, USDA did adjust the export projection for durum higher in the January report to 40 MB, so the U.S. will need to make more sales in order to reach that goal, but that’s a positive in the market.
Many of the sales have been to Italy, which is the dominant buyer by far with 18 MB of the 30 MB total. Another big region is North Africa with 5 MB. There is also 4 MB of durum to undesignated destinations, though it’s likely parts of that will go to Europe or parts of North Africa. There have also been some small sales into Central America where sales have been off a little compared to last year.
“Looking at the USDA reports, the agency did raise the export projection to 40 MB. There were no adjustments to food or feed use, but I think there may be room for more gains in feed use projections,” Peterson said.
At this time, of the 88 MB in domestic demand, about 80 MB is food use which is the same as a year ago. Expected seed use is at 3 MB, which is up from 2 MB on higher anticipated use from increased plantings this spring. Feed use is just at 5 MB, which is actually down from 6 MB a year ago. In 2016, which was another quality challenged year, 19 MB went to feed, so Peterson feels we may see further adjustments in feed use.
“The bottom line is that come June of 2020, ending stocks are projected to be just 21 million bushels, which would be less than half of the 55 million in ending stocks last year in June,” he said. “So, no doubt inventories are going to get tighter as we go into spring.”
The Dec. 1, 2019, stocks estimate for all durum bushels in the U.S. had 64 MB and that compares to 83 MB on Dec. 1, 2018. On-farm inventories were only at 33 MB versus 47 MB a year ago and that is roughly split 50-50 between North Dakota and Montana.
Off-farm inventories are running a bit lower. Just to show how strong demand has been in the fall quarter, Peterson explained that September to December disappearance for 2018 was only 7 MB, and in 2019 there was 24 MB.
“So it was a very strong fall quarter, both domestically and export-wise,” he said. “It does correlate well with what USDA is projecting for end of year stocks.”
The big thing going forward for durum is how will Canadian and U.S. producers market their good durum going into spring and where will planted acres end up.
“I think the domestic industry is banking on a flat to even declining market just with the anticipation that they’ve got coverage out through this spring,” he said. “They’re expecting they can buy from Canada quite readily and they expect a big increase in planted acres in both the U.S. and Canada.
“I think they may be a little optimistic on a flat to declining market, and even though we may not see a huge run-up in prices, based on current dynamics there’s no doubt inventories are getting tighter going into the 2020 harvest,” he added.
Looking at the current trend from Canada, U.S. imports are down 85 percent from fall 2018 levels. The U.S. has only brought in 1.5 million bushels.
Peterson noted that Canadian exports are higher and are similar to the U.S. at 62 MB in sales through the end of November, which is up 65 percent. A majority of their sales have been to Turkey, Italy and Morocco.
“I think they’ve seen a better than expected sales pace early on for their durum in overseas markets. Granted it’s the lower end, but I think that’s tightened up inventories more than anticipated,” Peterson said. “We’ll see what happens going forward. Who wins out? I think producers are obviously hoping for further price escalation, especially for the good durum.
“It’s certainly not a given that we’ll see a notable increase in planted acres, especially as wet as that region is. Historically, $6.50 to the producer, while it’s certainly a good price, it may not be the significant an acreage driving price like buyers tout,” he concluded.