The cash market for durum remained largely inactive into early February but continued to hold in the $4.50-$4.75 range for milling quality durum, according to Jim Peterson, marketing director for the North Dakota Wheat Commission.
He added that the Minneapolis cash index is at $4.60 per bushel. That’s nearly $1.50 lower than a year ago at this time when the cash index was at $6.
“As we talked about the last month or so there’s just a real sluggish world durum trade environment and some significant extended coverage by U.S. domestic mills, meaning the pipeline has never really gotten pinched,” Peterson said. “Buyers never really felt the need to panic or double buy or try to extend more coverage. Until we work through some of the world supplies and maybe see a production hit within North Africa the durum market looks to remain in a fairly flat situation.”
The International Grains Council came out with some updated data recently in which production was adjusted. Somewhat disappointing from a price standpoint, the IGC lowered the trade outlook to a six-year low of 290 million bushels in exports. That compares to 310 million a year ago.
“Back in November, early December, IGC was projecting about 40-50 percent higher import needs within the EU primarily due to some quality shortfalls,” he said. “That was one area where we had been hopeful that the U.S. would capture some demand within the European Union. But now the IGC has adjusted that and is calling for closer to about a 10 percent increase. That may make exports a bit more challenging going forward this spring.”
Looking at how both the U.S. and Canada are doing in terms of exports, Canada has come out with its August/December durum shipments as of the end of December. Total durum shipments are listed at 53 million bushels which is about 7 percent behind a year ago. Specific markets for Canadian durum include Morocco, its leading market, where sales there are up 20 percent. The U.S. is Canada’s second largest market, with sales about 50 percent higher than a year ago at 11 million bushels.
Where Canada has been more challenged, Peterson pointed out, is in Algeria where they’re running 60 percent behind a year ago, and Italy where sales are running about 35 percent behind.
U.S. export sale sheets are usually a month or month and a half ahead of Canada, but, interestingly, because of the lack of USDA reports due to the government shutdown, this was one of the rare times when U.S. data was behind Canada in terms of a specific time period. As of Dec. 20, the U.S. had 15.4 million bushels of sales on the books. Roughly 50 percent of that is to Italy with another 20 percent to Algeria, 20 percent to Nigeria and 10 percent split among Central American countries and others.
“There are rumors the U.S. has been able to make a few more sales to Italy and probably a bit more into Central America, so hopefully, once we get caught up at the end of February with the export sale numbers, it will show an even higher pace,” Peterson said.
“USDA is projecting 30 million bushels in exports so we have a way to go,” he continued. “It’s certainly refreshing to be 50 percent ahead of a year ago, but the reality is we probably should be double the pace, so we’ll need to see sales pick up over the next few months.”
Peterson pointed to some positives for the market going forward. One is that world durum values seem to be tightening slightly, so that may be a good sign that the market has hit a bottom in terms of where durum prices are at.
In a few markets Peterson noted feed use of durum has been increasing, not due to quality issues, but simply because durum is one of the cheaper classes of wheat in the world market.
“It’s cheaper than bread wheat in a lot of markets, so that’s why we’re starting to see more durum going to feed, so hopefully that will be a positive in helping to cut into the surplus,” he said.
With mid-February approaching, the market, and producers, are starting to get early looks at planted area for durum next year. Agricultural Canada came out with its early estimate which is projecting a 25 percent hit to Canadian durum acres. North Africa is looking at a slight decrease and the U.S. will obviously be lower as well.
“Those are some positives, but the challenges are our reality and that’s that ending inventories in both the U.S. and Canada will likely be 20-30 percent higher come the early part of this summer than a year ago,” he said. “This includes what’s in producers’ bins as well as what’s on hand in mills or export locations.
“So even though we’re going to plant less acres, buyers in the market know that ending inventories are not critically short so we’re still going to need some kind of more dramatic weather scare either in North Africa or parts of the EU,” he continued. “We still need to get our crops planted in North America and planting delays can always have a big impact on acres as well.
“We’ll see what happens going forward, but for right now the market is kind of stuck in the range it’s been in since the mid-part of September, waiting for some fresh news to take us out of it,” he concluded.