The nearby durum prices continue to inch up a bit as the holiday season approaches as $8.25 seems to be a more consistent bid across the region.
“Nothing too significant as for price gains and it’s probably just a reflection of end users trying to bring in a few supplies before the holidays, before we hit a bout of cold weather in January,” commented Jim Peterson, marketing director for the North Dakota Wheat Commission. “And that’s played against steady but not overly strong producer sales, although producer sales appear to be a little stronger than anticipated in some areas, so that’s probably helped keep the market in check a little,” he added.
Looking at new news in the market, perhaps the one big factor that impacts durum is that Stats Canada came out with its revised 2012 production numbers. The agency’s latest estimate pegs production at 170 million bushels which is up 11 percent over 2011 and about 8 million bushels higher than its October estimate.
“Canada generally had good quality in both spring wheat and durum and they’ve been fairly strong in their export pace early on,” Peterson said.
In terms of world durum numbers, the International Grains Council (IGC) came out with revised data keeping world durum production at 1.3 billion bushels, down about 50 million bushels from last year.
“Since August we haven’t had much change,” Peterson noted. “There’s a slightly larger Canadian crop, a smaller U.S. crop and a slightly smaller EU (European Union) crop compared to early summer expectations, so really there’s been no supply change in the world market.”
Taking a look at the IGC’s projection for world trade, they’re estimating 260 million bushels in trade, which is down slightly from 275 million last year. Of that trade, 41 percent is imported by North Africa and 27 percent by the EU, and another 18 percent between the U.S., Venezuela and Japan. That only leaves 15 percent to trade to other markets in the world.
“When countries in North Africa and the EU need to buy, prices tend to strengthen,” he said. “But when either of those two buyers are absent it can lead to a flat, stagnant world market.
“That’s where we’re at right now. Supporting prices in the longer term is the fact more buyers are becoming concerned about less durum acres next year, not just in the U.S., but worldwide,” he continued. “Pressuring prices in the short run are the fact that both North Africa and the EU are not projected to show significant increases in imports this year.”
One positive that may benefit the U.S. and Canadian exports, especially into Italy, is an anticipated decline of Australian durum exports by about 50 percent from a year ago. That’s due to both production issues – being too dry early – and also some quality issues with rain at harvest on part of the crop.
However, on the flip side, Canada is expecting 56 percent of the world durum trade and their early sales pace has been stronger so they may end up with a greater share, according to Peterson.
Looking at U.S. durum exports, Peterson noted there’s a conflict between what the IGC is projecting compared to what the USDA is projecting.
“IGC is projecting our exports will be 35 million bushels. USDA is only projecting 25 million,” Peterson said. “As of right now the USDA number is probably more realistic. As of early December we had 12.5 million bushels in sales compared to13.2 million a year ago. By region our sales to North Africa are down 33 percent from a year ago, but they’re basically unchanged to the EU, and0 we’re up about 60 percent to Central America.
“So over the winter months, if we see North Africa or EU pick up import demand, or Canada run into logistical issues on export sales, those would be positives for the U.S.”
On the domestic side, sales are still strong, but one thing that will be interesting to watch is that in the last month or so the U.S. has seen a little more consolidation in the U.S. pasta industry, as well as a restructuring by some companies. This may impact front end demand a little bit as companies sort through management changes, according to Peterson.