Durum

With the Great Lakes closed for the winter and this typically being a slow period, the durum market remains in a winter lull.

“There hasn’t been much change since the early part of February. I guess that’s not atypical for this time of year,” said Jim Peterson, marketing director for the North Dakota Wheat Commission. “There’s not a lot of new crop production type information or weather concerns to add volatility to the market. It kind of ebbs and flows with demand versus producer sales.”

On a positive note, one barometer of the market is the Minneapolis Grain Exchange durum cash index and as of mid-February the price was about $6.22 a bushel, which is up 15-20 cents since the first part of the year and the highest level since early December of 2019. That’s about $1.50 higher than a year ago.

With that said, Peterson noted it’s somewhat surprising to see some variability in elevators across the region. While many elevators continue to hold at $6.50 for top-end durum, there have been a few elevators where prices have slipped to the low $6 level.

“It varies with what demand they have for trains scheduled to arrive versus what type of quality they’re dealing with,” he said, adding that in northeast Montana bids have ranged from $5.95 to $6.40 with an average of $6.20. “That’s not a whole lot of shift over the past month or so, but maybe a slight improvement in overall cash prices.”

As far as USDA projections, there were no adjustments in the Feb. 11 report. USDA kept imports at 40 million bushels (MB), which is down from 51-52 MB the last two years, and reflects about a 20 percent reduction.

“If we look at actuals from August through December, the import pace from Canada by U.S. mills was just 3 MB in shipments. That compares to a year ago when shipments were at 11 MB for that same time frame, so definitely showing a sharper reduction in actual trends versus projections,” Peterson said. “I know a lot of millers and buyers anticipate a more aggressive movement out of Canada to the U.S. from now through early summer, so we’ll see what happens.”

Domestic food use is currently at 80 MB, according to USDA figures, which is the highest in 10 years and “a very strong positive.” Peterson noted that some of the mills indicate their grind time may be cutting back a little bit. It’s not known whether that number holds through spring, but nonetheless, the U.S. has very good domestic mill grind to date.

Export projections have held at 40 MB in USDA’s report, which is also the highest in 10 years. The current sales pace is at 30 MB as of early-February. That compares to 15.4 MB a year ago, so essentially double the pace and right on cue for USDA’s projection for the year.

As far as current sales, Italy continues to be the dominant buyer with 20 MB, or two-thirds of U.S. durum sales. The African region has purchased 5 MB, while 3 MB have been purchased by countries not yet designated. The remaining 2 MB have been split by Japan and Central American countries. Out of the total sales, there is 24 percent remaining to be shipped.

“I think that’s a positive going into spring. There’s going to be some demand to load those vessels once the Great Lakes open up this spring,” he said.

“I guess with those projections, the current stocks projection of just 21 MB on hand between producers and grain handlers as of June 1, 2020, is what USDA is projecting and would be the lowest in 13 years and down almost 62 percent from a year ago,” he continued. “The big question is, what is the quality of those stocks? Not only is the actual number tight, but I would theorize that the quality of those stocks may be a bit tight as well just with some of the weather we had last year.”

Going forward, the 2020 crop prospects will start to take on a greater focus and probably drive deferred prices a bit more than they are now, according to Peterson. In the meantime, the market will continue to monitor the growth and emergence of the European Union crop, as well as rainfall patterns in Algeria, Tunisia and Morocco.

“Many analysts are expecting a downturn in Algerian production – just playing the averages,” he said. “They’ve had a pretty good run of weather of late. If they get back to their typical weather patterns we could see a smaller crop in Algeria, which would be a positive going forward.”

Looking ahead to the planting situation for North Dakota, Montana and Saskatchewan, Peterson said many analysts are anticipating an increase in durum acres.

“There’s no doubt, with the premium of durum to spring wheat, that there’s going to be an increase in durum plantings this year,” he said. “The question is just how much? In visiting with a lot of producers, I think the expectations are a bit lower than what a lot of the industry is anticipating.

“And also, how timely will planting be? The durum region by and large is not looking at a lot of snow cover,” he continued. “We’ve had a period of warm weather, so as of right now, if we have normal spring moisture and temperatures, one would estimate a pretty timely planting for a lot of the main durum region, unless we get a lot of late-season snow, or a cool, wet April and an early May.

“Other than that, there’s not a whole lot of new news in the durum market, but maybe a little bit of strength in the overall U.S. values,” Peterson said. “We’ll see what happens over the next few months and if we get anything exciting or unexpected in 2020 plantings.”