While spring is almost here, cold, snowy weather may have an impact on the timing of planting 2019.
Durum prices across the main durum growing areas of North Dakota and northeast Montana are still hanging in the middle to upper $4 range with most bids coming between $4.50-$4.80, although there has been a little more consolidation on the upper end, according to Jim Peterson, marketing director for the North Dakota Wheat Commission.
“If we look at the Minneapolis Grain Exchange Index, which is a barometer of all the prices across the region, prices are at $4.72, and we started the first of the year at $4.55, so prices are up marginally,” Peterson said.
“The bitterly cold weather that has plagued the region now for over a month is probably making some of the pipelines a little tighter and that’s maybe part of the reflection of why we’ve seen a little bit of strength in prices.”
Peterson also noted that rail velocities are down a bit partly because of snow, but a lot of it is the bitterly cold weather just slowing things and also probably impacting movement from the farm to the elevator a bit.
On the demand side, U.S. durum export sales remained steady with recent trends. World durum trade is at a six-year low due to the larger North African crop and that’s impacting both the U.S. and Canada in terms of capturing export demand.
As of Feb. 21, the U.S. had shipped 13 million bushels of durum, which is up 30 percent from the 10 million bushels of a year ago at this time.
Sales on the books for the U.S., those that are sold but not yet shipped, total 4.3 million bushels. That compares to 3.7 million last year.
By country, Italy is the largest market for U.S. durum accounting for 9 million bushels in sales. That’s about 40-50 percent higher than a year ago.
“That’s certainly a bright spot in terms of exports,” he said.
“Where the challenge is, is in Algeria where sales are down about 10 percent at 4 million bushels,” he continued. “In Nigeria we’re doing better. It’s not a large quantity but we’re up about three times what we shipped to Nigeria a year ago. Sales to Central America are up 20 percent, although it’s a relatively small number, but the percentage is positive. And in Japan we’re seeing about four times higher demand.
“Those are some positives, but again, the overall challenge is that we’re projected to be about 50 percent higher in sales compared to a year ago so we’re going to need to see March-April-May be some pretty good export months,” he added.
Looking at Canadian durum, their August through January numbers are running 10 percent behind with 62 million bushels shipped. That compares to 70 million last year.
“Looking at some of their key markets, unfortunately, the U.S. is their number one market with 14 million bushels in durum shipments,” Peterson said. “That’s up from 10 million a year ago at this time.”
Canada’s number two market is Morocco at 13 million bushels, which is steady with a year ago. Italy is number three with 9 million in shipments, which is down 10 percent.
Another big market for Canada was Turkey with 5 million bushels in sales there. That’s up from 2 million a year ago.
“Going forward, the cold, snowy weather that we’ve had may be a factor,” he said. “Canada probably hasn’t had as much snow as we’ve had, but they’ve certainly had some cold weather and there is starting to be some concerns about the start to spring planting and if we get into a delayed situation and what impact that could have on acres, hopefully that would put some support into prices to try and buy some acres.”
Early estimates are for a 20-35 percent cut in acres in both Canada and the U.S. based on current price levels and conditions.
“If we get into a delayed planting season or challenged that way, obviously that could potentially take that a little bit lower,” he said.
The market and producers will get an idea where acreage comes out in late March when the U.S. planting intentions report comes out, and then later, in the third week in April, when Canada releases its planting intentions report.
To put things in perspective, through February the initial insurance price is established for wheat, which is basically the average of September Minneapolis futures for the month of February, Peterson explained.
“There is a slight premium added for durum versus spring wheat, but the cash price for each is what’s driving expectations for a dramatic cut in durum,” he said. “If we look at the insurance price, a year ago at this time durum was $7.11. This year it’s at $5.98, so that’s down over a dollar from a year ago. In comparison, spring wheat is at $5.77 this year versus $6.31 a year ago. So even though they’re both lower, spring wheat has taken less of an insurance price hit than durum. I think it will take movement in the cash price to try to stimulate acres.”
The other USDA report which could impact markets a little bit is an updated supply and demand report on March 8. It will likely impact corn and soybeans and the overall wheat market more so than durum.
Three key numbers in the report could be adjusted including exports. Currently USDA is projecting 30 million bushels in durum exports from the U.S. versus 18 million the previous year.
“That may be a little optimistic based on current sales,” he said.
Other numbers include imports which are similar to 51 million last year. Based on the trend from Canada, Peterson said he would expect USDA not to lower the import number.
USDA is projecting carryover stocks at 45 million bushels in the U.S. on June 1, 2019. That’s up from 35 million bushels a year ago.
“But if we look at the Dec. 1 stocks report from USDA, they had inventories at that time at 84 million bushels and that was up 49 percent from the previous year,” Peterson said. “They could likely lower the export number a little which could, unfortunately, add to ending stocks.
“But we’ll see what happens. We’ve been pleasantly surprised before,” he continued. “Hopefully it will put a little more support under durum prices because as of right now prices are not going to incentivize any steady durum acre trends. It’s just a matter of how deep a cut producers take this next growing season.
“Globally we’re in a lull period for both North Africa and Europe and we probably won’t get any weather influence until we get more into April and May in terms of those crops,” he said. “So, it’s steady as she goes which has been the same trend for the last three months in durum.”