Drought overseas could boost durum exports

Drought in the Middle East could bring durum markets out of the doldrums brought on by a glut of Canadian production.

“That could be one of those wild cards for durum that bears watching,” said Jim Peterson, marketing director for the North Dakota Wheat Commission.

“It would be an important market factor.”

Jason Nicholls, senior meteorologist with AccuWeather, said large portions of Turkey, Syria, Lebanon, Israel and Jordan are suffering from extreme drought.

Much of the grain growing region of Turkey has experienced 40 to 70 percent of normal rainfall since Dec. 1. It has been less than 50 percent for Syria, Israel and Lebanon.

Syria and Turkey are not significant durum importers, but they are big producers, harvesting a total of 4.5 million tonnes last year, or 12 percent of world production.

Nicholls said there is little doubt yields will be reduced in the Middle East. Harvest begins in early May.

As well, Turkey recently had a severe cold snap that caused winterkill.

“It was enough to impact the crop that was already stressed,” said Nicholls.

Peterson said a production shortfall in the Middle East could create enough additional demand to partially offset surplus global production caused by last year’s Canadian crop that was two million tonnes, or 43 percent, larger than the previous five-year average.

Durum is not a heavily traded crop, with world trade amounting to 6.8 million tonnes per year. As a result, an unexpected 680,000 tonne surge in demand from the Middle East could have a substantial influence on prices.

Peterson said May and June is the time of year when there can be price action. Crops are coming off in the Middle East and North Africa, quality problems can surface with the European crop and there can be planting issues in North America.

The U.S. Department of Agriculture expects U.S. growers to plant 1.8 million acres of durum, up 22 percent from last year.

Peterson said the big increase is simply a rebound from last year’s disappointing spring, when it was too wet to plant the crop in northwestern North Dakota, where 40 to 50 percent of the U.S. durum crop is seeded.

“We were dealt a pretty harsh hand by Mother Nature last spring, and (the rain) happened to fall right into our main durum growing areas,” he said.

Plantings will still be 11 percent below the five-year average.

There isn’t a strong incentive to grow durum. Milling quality product is fetching a 20 cent per bu. premium over spring wheat, but most growers believe there is a $1 per bu. risk discount for growing durum because of inferior yields.

Agriculture Canada sees a six percent decrease in Canadian plantings to 4.67 million acres, which is in line with what Peterson expects.

He believes the anticipated 2.3 million tonnes of carryout from Canada’s 2013-14 crop will keep durum markets from rallying unless there are harvesting problems overseas or planting problems in North America.

However, the market seems to indicate the carryout might not be as big as Agriculture Canada is forecasting.

“We really haven’t seen our durum prices break that hard. They’ve stayed pretty steady all winter,” said Peterson.

“I think that’s a sign that there is maybe a little more tightness in the market than what the numbers show.”

He is not extremely bullish or overly bearish on durum.

“It seems to be in a fairly good balance now.”

Peterson wonders about the quality of the Canadian carryout. He expects growers probably moved the better material first because of the $2.50 to $3 per bu. premium for quality durum versus damaged product.

U.S. mills have used a lot of good quality Canadian and U.S. durum, and pasta sales have been strong in that market.

As a result, exporters may have to find a home for poorer quality product in places like Iran and South Korea.

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