Market watchers keep eye on dry durum conditions

A disappointing harvest in Algeria and Tunisia could spark import demand

Durum prices could rise due to dry conditions in western Canada and North Africa.

Large parts of the western Prairies need rain and there are reports that drought is curtailing durum production in Algeria and Tunisia, two important importing countries.

Reuters reports that Algeria’s total cereal output will remain at last year’s relatively low 3.4 million tonnes, which was down from the 4.9 million tonnes produced in 2013.

The country had expected better results but low rainfall in March and April reduced those expectations.

Reuters also reports that Tunisia’s grain harvest will fall by 40 percent in 2015 to 1.4 million tonnes, which will result in increased imports, including one million tonnes of durum.

Jim Peterson, marketing director of the North Dakota Wheat Commission, said he relies on International Grains Council data and the IGC did not reduce its production number for North Africa’s durum crop in its latest report.

But he acknowledged that rumours are starting to circulate that it could be a disappointing harvest overseas.

“We have been picking up that the crops were probably going to be smaller than some of the earlier forecasts,” he said.

Neil Townsend, director of CWB Market Research, is picking up the same vibes.

“They have definitely suffered some scale-back in production,” he said.

Townsend believes that could result in an additional 250,000 to 500,000 tonnes of import demand from the region.

Peterson said Algeria, Tunisia and Morocco typically account for 40 to 50 percent of world durum imports so any production shortfall in the region has to be taken seriously.

“That’s obviously a region that will be watched closely,” he said.

He is even more interested in Canada’s production prospects because it typically accounts for 50 to 60 percent of world exports.

It has been dry in the key durum production regions of Saskatchewan and if that pattern continues into July, it could mean trouble for the crop.

“To me, that could be a bigger market mover,” said Peterson.

Markets have not responded to the dry conditions in Western Canada because it is early in the growing season and there hasn’t been excessive heat. They are also awaiting more news on North Africa.

And then there is the U.S. crop, which was planted early and is off to a nice start with recent rains bringing relief to dryer areas.

“It’s certainly a good looking crop,” Peterson said.

“Is it our best looking crop ever? It’s probably not in that camp just because there are pockets of dryness.”

The big debate in the U.S. is whether the U.S. Department of Agriculture got the acres right in its March prospective plantings report.

The USDA estimates 870,000 acres of durum went in the ground in North Dakota. Peterson said the consensus in the farm community is that the number should be closer to 1.2 million acres.

He expects the USDA will increase its number in the June 30 acreage report. That would mean more production from south of the border helping offset potential production problems in Canada and North Africa.

The other possible market mover would be quality problems with the European harvest, which starts this month in Spain and Italy.


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