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Italy’s return to market pushes durum exports

Shipments to all customers increased 57 percent over last year, despite a 13 percent drop in production

Canadian durum exports are way up through the first 10 weeks of the 2019-20 campaign due to unexpectedly strong interest from an old friend.

Grain companies shipped out 920,700 tonnes of the crop, a 57 percent increase over the same 10-week period last year and 41 percent above the five-year average, according to Canadian Grain Commission statistics.

That is despite Canadian durum production falling 13 percent to five million tonnes.

Much of the tremendous uptick in sales is due to a surge in buying from Canada’s former top customer.

Italy bought large volumes of Canadian durum in the last quarter of 2018-19 despite discriminatory country-of-origin labelling legislation in that country, and the trend appears to be continuing in 2019-20.

“The outlook for high quality durum is not great. Those (Italian) processors and importers that need to reserve high quality durum are now doing so,” said Cam Dahl, president of Cereals Canada.

The CGC only has country-specific export data for the first month of the 2019-20 crop year.

Italy was by far the biggest customer, buying 112,400 tonnes of Canadian durum, followed by Turkey at 60,100 tonnes and Morocco with 32,600 tonnes of imports.

“We really are the supplier of last resort for high quality durum (to Italy) but they seem to have hit that last resort,” said Dahl.

He suspects Italy led the way again in September and the first half of October, but the buying spree could be coming to an end.

“I don’t see that continuing, definitely not at this pace, for much longer,” said Dahl.

Italian farm group Coldiretti has been waging a publicity war against Canadian durum, attempting to keep it out of the country to boost demand and prices for domestically produced durum.

“We’re seeing the campaign against Canada really ramp up again,” said Dahl.

Neil Townsend, chief market analyst with FarmLink Marketing Solutions, said other customers are also nervous about the quality of the North American crop.

“When we started to have some signs that maybe there would be some quality problems with the Canadian durum and the U.S. durum, people might have bought a little bit more because they want to make sure they have good quality durum,” he said.

Buyers were aware that Canada carried over a considerable amount of No. 1 and No. 2 quality durum from last year’s crop. Agriculture Canada pegged 2018-19 carryout at 1.68 million tonnes, an 18 percent increase over the previous year.

He estimates that one-third of this year’s crop will make the top two grades, one-third will be No. 3 and the remainder will be No. 4 or lower.

“There’s more of a menu for people to select from,” said Townsend.

The shortage of top quality durum is causing prices to rise, with No. 1 CWAD fetching $8 per bushel in some western Canadian locations. Prices for No. 5 CWAD are about half that amount.

Prices for top quality Canadian durum are primarily established by U.S. millers.

The U.S. crop was hit hard by poor harvest weather. Most of the crop is produced in five or six counties in Montana and North Dakota and conditions were grim in those regions.

Desert durum production is dwindling as growers in Arizona and California shift into growing more lucrative crops, such as vegetables.

“Just looking at the U.S. elevator index, it has kind of clawed back to its highest level in about 12 months,” said Townsend.

He believes there is room for durum prices to drift higher either in the short-term or when the St. Lawrence Seaway reopens for buying in January or February for March-April delivery, or at the end of the crop year when buyers are looking for coverage before the next harvest.

Growers can play a big role in determining where prices head. Townsend said there is a group of Canadian growers willing to hold out for double-digit prices for No. 1 CWAD.

U.S. growers often display even greater marketing discipline because they can rely on government support programs for cashflow.

He suspects growers south of the border who were fortunate enough to harvest top quality durum will lock their bins.

“That could benefit Canada too,” said Townsend.

He said Canada’s early-season export success has been helped by small crops in the European Union, Morocco and Kazakhstan.

The International Grains Council is forecasting a 2.5 million tonne or seven percent reduction in world durum production.

Kazakhstan is one of Canada’s top competitors in key export markets.

APK Inform recently published a Kazakhstan production estimate provided by Ivan Malygin, a trader with GrainPartners LLP.

Malygin told delegates attending the Kazakh Grain Export 2019 conference the country produced 559,000 tonnes of durum, down from 730,000 tonnes the previous year.

He is forecasting 480,000 tonnes of exports, down from 560,000 tonnes. Kazakhstan’s top customers are Italy, Russia and Turkey.

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