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Tuesday, March 28, 2023

Durum market trend in contrast to other wheat

Mark Conlan AgUpdate.com

While other bread wheat markets are witnessing a lot of volatility with price volatility, durum is behaving in an entirely different way.

“With Durum, the market continues to defy the trends of other markets and actually subsides,” said Jim Peterson, marketing director for the North Dakota Wheat Commission, in late March. “Obviously, this indicates that the durum market is a little more isolated from some of the others, and likely continues to sell off from the higher prices that reached this fall and the first of winter.”

The question is whether this trend will continue. Much of this will rest on the March 31 Planting Intent Report.

“There is a lot of sentiment in the industry at this point in time that even though supplies have been low last year, there will be a significant increase in durum planting this year, which will help offset that,” he said.

Looking at current prices, many bids have returned to the $12.50 per bushel range locally. The National Durum Index was up at $13.15 per bushel in early March, and has now dropped to around $12.70, reflecting similar trends. In early January, Peterson noted that the price was near $15.50, so it is showing a selloff of around $3 per bushel at the time.

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According to Peterson, one of the big challenges is that supply chain issues have significantly reduced US domestic demand, not necessarily all related to COVID, but only packaging materials, receiving materials and trucking and other factors. are trying. taken for most years. Over the past year or so, those issues have gripped the industry and pulled production back and, as a result, lost some demand.

In addition, with the price premium of durum for spring wheat, there was some product substitution in some regions.

“Going forward, if we move into a more stable environment at these price levels, hopefully we can achieve a rebound in domestic demand,” he said.

Similar to US producer prices, the Chicago price, which is the price of much semolina, has returned to about $16.50 per bushel. At the beginning of December, they were at $18.75, so there was no drop of $3.

“What we’re hearing from domestic pasta makers is probably 30-35 percent in the third quarter and a lot less in the fourth quarter,” he said. “We’ll see what happens after the March 31st report, whether we get more ‘concerns’ or if we see something to address the needs of the industry for the next year.”

Looking at other global issues for durum, in Canada, local pass prices are as high as $13.20 a bushel, slightly stronger than US prices. This equates to about $11 (US) on their new crop. Canada’s major challenge has been the export end. Their export shipments so far are down about 55 percent from a year ago. In February, they listed only 7 million bushels, up only 40 percent from the previous year. Their planting report won’t come until the end of April, but initial ideas are for a 5-10 percent increase in durum planting.

“Like the US, they are running into some rail logistics issues and that’s probably going to affect producers on both sides in the short term,” he said.

Looking at the European Union (EU), both the US and Canada continue to struggle to compete in that market as our prices are at a $2.50-$3 premium to some French prices, making some sales very difficult to capture. Happening.

Belgium-based EU trade association, COCERAL, recently came out with its updated 2022 projections. The agency is forecasting a modest increase in durum acres in the EU, going from last year’s 5.8 million to 6 million acres. This is less than the increase that many had predicted. But they look like a little less production than they were a year ago. Currently, COCERAL has a low yield outlook for both Italy and France, where they have some degree of dryness.

“We will see if this continues as they move forward with their monthly projections. But it is not heavier than the EU in terms of improving next year’s crop production,” he said.

In addition, the International Grain Council (IGC) released its updated March report, which did not contain any significant adjustments. The IGC increased exports from both Turkey and Mexico, while reducing EU and US exports as a result.

“We have seen that trend over the past few months where, at these price levels, Mexico, Turkey and Australia are able to find more stocks to export to the world market, which probably helped push prices down a bit,” They said. ,

It is also worth noting that Algeria, Tunisia and Morocco have been extremely dry for most of the winter, but some recent rain has eased some concerns. The rain may have been too late for the Moroccan crop to make any significant gains, but there are indications that it benefited the Algerian and Tunisian crop prospects, while perhaps stabilizing the Moroccan crop.

Lastly, domestic demand in the US has been slowing as durum prices are moving in the opposite direction of spring wheat prices.

The March 31 planting intentions report will help provide some direction to the market. Industry analysts forecast an average of 1.73 million durum acres in the US, up from 1.64 million in 2021. This is about 90,000 acres or an increase of only 5 percent over the previous year. Earlier, a lot of industries were expecting 10-15 per cent growth.

The USDA recently came out with a discussion on the outlook for drought. About 75 percent of the US Durham area, mainly in the north, is in a state of remarkable drought.

“If we don’t get additional moisture soon and during the growing season it will be a growing concern,” Peterson said.

The US desert durum harvest, which accounts for a small fraction of the total US durum crop, will be more important than usual due to the short supply at hand. In its weekly crop ratings, Arizona notes that 67 percent of its crops are rated in good-to-excellent condition. This is compared to 28 percent last year, and 44 percent of the crop versus 33 percent last year.

“It’s all under irrigation, the only risk is that it might catch some April freezes, which could be an issue. But at the moment it’s in better shape than it was a year ago,” he said, adding that the crop was harvested in June. it occurs

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