Things have remained pretty much the same over the past few weeks, with very little new news providing direction to the durum market.
According to Jim Peterson, marketing director for the North Dakota Wheat Commission, the durum market has been in a steady state for the past few weeks.
“Right now it’s stuck at the status quo. There hasn’t really been much movement in prices since the beginning of September. Most bids for top-end durum are in the $9.75-$10 range,” he said. “Recently some more definitions have started emerging in the market. European prices have also stabilized slightly. But that doesn’t mean the durum market doesn’t have a lot of support underlying it.
“And depending on how demand evolves over the next few months and what the final US and Canadian production and quality is, there are certainly factors that could drive the market higher, but only time will tell,” he adds.
“But, as producers know, there are a lot of changes impacting the market and there are also a number of headwinds that could move it in another direction, whether it’s geopolitical issues or unknown developments over the next few months ,” They said.
Looking at harvest progress, Montana was 88 percent complete as of September 10, which is ahead of their long-term average pace. In North Dakota, harvest was 68 percent complete, which is behind the average pace of 74 percent. In both states, Peterson said yields and quality remain variable.
“Due to some rain and sluggish weather in late August and early September, we are seeing a slightly greater impact on the crop than we expected. This includes low color counts at harvest and, in some cases, increasingly low color counts,” he said, adding that this is one of the main pricing variables with durum.
“When mills are making yellow semolina, they want the grains to be bright and hard because when mills are making semolina, they want to get the highest yield and highest quality. As you lose color and the kernels soften a bit, you produce more flour and less yellow color, which is not ideal for pasta production,” he explained.
Also, the price spread has started increasing in local dialects also. He said the $10 bid is for high-end durum, and that’s with 90 percent hard count, 13 percent protein and very little damage. Any significant loss in quality drops the price by $2-$3 or more.
“We’ll see what the final data shows and, as I said, we still have about a third of the crop left to harvest in North Dakota. Some of them were still green enough and perhaps not mature, so there has been less impact, but time will tell,” he said.
“There are still a lot of good quality bushels left. I think some producers took advantage of the earlier price strength and carried some of that forward, but demand will pick up going forward,” he said.
Peterson thinks U.S. mills have pretty good forward coverage and pasta plants probably have better coverage than they did a month ago, but perhaps there still needs to be some pricing for the fourth quarter.
Internationally, prices in Europe have also declined slightly since August. With some export sales to Europe from Turkey and Russia, he said there is a lot of debate over how much more they can export in the near term, but there is a little more scope out of Turkey.
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“But, ultimately, the bulk of demand for the fall and winter months and from North Africa and Europe next spring is going to come from the US, Mexico, Australia and Canada,” he said.
Looking at US exports, sales in early September were 7.2 million bushels (MB), up 50 percent from a year earlier.
“Granted, it is a small number, so the percentage is a bit exaggerated. However, we are seeing very good demand,” he said, adding that the top markets are Algeria, Italy and Mexico.
Interestingly, more than half of the demand in the data is listed as “unregistered,” meaning there is no specified country. Over time, those spaces will be filled, but he believes it is probably one of the countries in North Africa or Italy that has made these purchases.
Most of the market’s focus at the moment is on Canada, partly because their summer crop has shrunk most dramatically in terms of size. The latest production estimate from Stats Canada was 156 MB, down significantly from last year’s 213 MB.
Additionally, as of the end of July, Canada was on pace to export 190 MB this year, though final data was still coming in.
“But, obviously, with a crop of 156 million bushels they are not going to have the same level of exports again next year,” he said. “And their end list is historically tight, so there’s very little carryover to work with, too.”
That 156 MB number is based on Stats Canada’s 26.8 bushel per acre yield estimate and is a source of debate right now in Canada. That’s because the government of Saskatchewan, which is “the North Dakota of Canadian durum production” and responsible for the largest share, has come out with its own analysis. The provincial estimate for durum was only 23 bushels per acre.
“In the upcoming Stats Canada estimate, which was scheduled to be released on September 14, I think some people were thinking at first that the yield estimate might be overestimated,” Peterson said. “But now, with the Saskatchewan estimate, perhaps much lower yields were being reported. So there is a lot of uncertainty over whether production will increase slightly more or it may decline further, which would certainly add another layer of support under the market.
73 percent is harvested in Canada, with varying yields and quality. For the most part, Peterson thinks it’s a good quality crop, it’s just the sheer number of bushels that is the big issue in Canada.
“Going forward, until we figure out what the final production and quality is in Canada and the U.S., there’s not a lot of new news or new direction in the market,” he said.
US production estimates are due in late September. There is certainly a possibility that the USDA could increase US production based on some improved yields reported in durum areas, but even that would probably be modest.
On domestic demand, USDA may see little change in domestic food use.
“(USDA) may revise it down a little bit because spring wheat prices are at $6.50, that’s a pretty notable discount to durum, so there’s going to be some replacement that may cut down the demand for durum a little bit,” he said. Could.” “But I think that will be offset by increased US export numbers as the year progresses.
“So the market has been stalled for some time as both buyers and sellers are hesitant to make big moves in the market. I would expect more clarity as we work through September and October,” he concluded.
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