Crop quality issues across North America and Europe could see durum prices peak in November, says one analyst
Durum buyers have begun chasing durum sellers, but they aren’t chasing too hard yet.
However, some analysts think western Canadian bids for No. 1 and 2 durum are likely to rise as supplies of quality durum diminish.
“I’ve been watching the market to see if it would eventually take off,” said Mike Krueger of the Money Farm advisory service in Fargo, North Dakota.
“Down here, prices have been relatively stable.”
Durum crop quality problems in Canada, the United States and Europe should help prices rise more than $1 per bushel, which has happened in the last month in Canada, Krueger said.
Neil Townsend of FarmLink Marketing agreed.
“My own view is that prices will peak here in the November to December (period),” said Townsend.
It’s because elevator companies would have used the first purchases of high quality durum mostly to cover short positions, and the demand would have slackened once those needs were met.
However, now that the grain companies see how tight the quantity of high-quality durum is, they will be keen to obtain it and make new sales, Townsend said. Then, as quantities shrink to negligible levels, buyers will probably back off, scared to pay too much for grain for sales they haven’t yet made or afraid to make sales for crop they haven’t yet obtained.
Little of Canada’s durum crop is in the top two classes. A lot is No.3 milling grade and there is also a lot of feed grade. Some has such high amounts of fusarium damaged kernels and vomitoxin that it will even have trouble being sold as feed.
Price spreads between good and poor quality durum are extreme with one industry source saying mid-Saskatchewan prices have been $7.30 to $7.60 per bushel for No. 3 but only $2.25 per bu. for feed. Prices over $10 per bu. for top quality have been seen in Canada and the U.S.
The No. 3 prices have moved up about $1 per bu. since September, but feed prices are languishing because so much is coming to market.
John Duvenaud, publisher of the Wild Oats markets newsletter, said prices around $2.50 per bu. for high vomitoxin durum appear to be its “salvage value,” and lots of grain might fall into that area.
Moving damaged durum will be challenging, Duvenaud said. Farmers tend to want to move their worst grain first, so fusarium and vomitoxin tainted durum has flooded the elevator system, and the elevators have been passing it along to the feed mills.
“Direct farmer sales to feed mills have more or less dried up because they can get all they can handle and more from the majors,” said Duvenaud.
Ethanol plants have also been taking low quality durum, but their appetite is likely to be restrained by the fact that vomitoxin is concentrated in dried distillers grain.
There is a huge spread between low and high quality durum, but a large amount of farmers’ grain will fall in the middle with some able to be blended up and receive a better price than its independent value.
“This is a critical year to know what you’ve got,” said Townsend.
“I’ve heard of guys able to sell a mishmash of stuff … for one price…. None of the stuff might have been No. 2, but you end up with a two.”
While some farmers want to move bad grain first, Krueger said others will wait for better opportunities.
“They’ll just tuck it away and won’t do anything with it until they get a chance a year or two or five (from now) to leak it off when the discounts aren’t so bad,” he said.