Durum market lackluster as new year begins

Other than some USDA reports earlier this month, there hasn’t been a lot of new news to stir the durum market as the new year gets underway and, as a result, it continues to lack any real luster.

“There’s not a lot of new news from which to get new direction,” said Jim Peterson, market director for the North Dakota Wheat Commission, adding that local bids for top-end durum have drifted down to as low as $9.25 in some areas, but $9.50 catches the high end.

The Minneapolis Durum Index was at $9.21 as of Jan. 17, which is up slightly from the first part of January when the price was $9.15. But compared to early December, the price is down about 50 cents a bushel.

Prices in Canada have trended similarly, maybe a little weaker than they were in December, and worldwide prices may be a little lower.

Peterson pointed out that there is demand in Europe and North Africa, but the US has not been the big beneficiary.

“Unfortunately, Canada has been the more aggressive one, more than our own export companies in trying to capture that demand. So we’re going to need to see some stronger exports in the coming weeks,” he said.

Looking at Europe, according to the International Grains Council (IGC), European durum values ​​are around $14 a bushel. Canadian and FOB (Free On Board) export values ​​are about $12.50 a bushel, and prices in Chicago are at $12.75.

“So you add ocean freight or back-off rail freight back to the country, there’s still a pretty decent spread to work with,” he said. “I think if we are able to capture some export sales, we can rally producer prices. But we’ve still got a sticky rail situation, some deliveries are as much as 45 days behind, so that’s keeping some tightness in the pipeline, but also some reluctance on sellers to get overly aggressive with the uncertainty of freight.

“The further we go forward, we may see some further weakness in European values ​​just because we’re going to be that much closer to their 2023 crop, and everyone is also more hopeful, or projecting a better crop preseason,” he added.

Looking at the way the IGC made adjustments for world values, Peterson noted they did lower world durum exports slightly from its November estimate, down to 300 million bushels (MB) from 310 MB earlier.

“But on a positive note, that’s up from 220 MB a year ago, so we definitely have more robust world durum exports this year, it’s just maybe down a bit from fall projections,” he said, adding the reason for that is it lowered Nigeria, Algeria, and the European Union slightly in their projected imports.

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“There are just a lot of markets where different dynamics are at play with some of the supply chain issues, food inflation, and there’s some of the spreads between the different wheat classes,” he said.

Regarding US supply and demand, USDA did not make a lot of adjustments in its January report, but the agency did raise projected imports by 7 MB, implying that the US will import 50 MB in the US That’s up 25 percent from a year ago. The majority of that 50 MB is pasta, but it also includes durum from Canada for milling. Domestic use is projected up 3 MB from last year to 82 MB, so the US will continue to see good domestic grind.

“USDA did put in a 500 million bushel feed estimate. Again, that’s a bit surprising when you look at prices, and not a lot of people typically feed durum,” he said. “Some of the rationale for that is when they do their Dec. 1 stocks estimate, they’re finding less inventory than expected. They know what exports are and they generally know what production is, so if they can’t explain it, there’s a category called ‘feed and residual.’

“The fact that they have some feed and residual either implies that we’re seeing better domestic use than they’re projecting for mill grind, or they overstated production a bit, at least in my mind,” he continued. “So that Dec. 1 stocks estimate definitely did show a bit more durum on hand compared to last year, but probably not as big an increase as what the production would imply for the US”

Total stocks were pegged at 48 MB on Dec. 1 in the report and 26 MB of those were on-farm and 22 MB were off-farm. A year ago, stocks were at 42 MB, so not that much tighter, and 17 MB were on-farm and 25 MB were off-farm.

“Again, this implies producers have still been fairly slow sellers relative to a year ago,” Peterson said, adding that North Dakota has 19 MB total durum on hand, and nearly 15 MB of that is on-farm. A year ago, the state had 17 MB total durum on hand, again not much different, but just 9 MB of that was on-farm. He noted the market is anticipating some producer movement prior to spring planting.

US durum exports, as of mid-January, totaled 10.6 MB in sales, which is halfway to USDA’s projection of 20 MB, which is a positive.

“We’re up quite healthy over a year ago when we had only exported 6 million bushels, so on the export end we are seeing some positives,” he said.

The big challenge for US durum, like with spring wheat, is Canada. Through November, Canada’s exports were at 57 MB, that’s up from 39 MB last year, and sales to Italy are 2.3 times higher.

“They’ve definitely been very aggressive in capturing the front end of that Italian demand. Canada’s shipments to the US total just 5 million bushels, but that’s up 52 percent from a year ago,” he said.

USDA’s acreage report, which also came out in January, does provide an early snapshot of the US desert durum crop in California and Arizona. USDA’s early estimate for the desert durum crop was only 90,000 acres, which would be down 30 percent from a year ago. The biggest declines were in California.

“I think just with ongoing water restriction issues and the fact that durum prices have fallen quite hard from the previous year, although they’re still attractive from a historical perspective, they’re not enough to compete with some of the other crops. At least that’s what the first estimate shows. But that certainly can change when the USDA comes out with its March estimate,” he said.

“Other than that, until we see some confirmed US export sales, or Canada has some shipping issues or drought developing in North Africa, we can probably just expect a pretty steady durum market.”

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