REGINA — There might be a strong rally in spring wheat, but durum prices have not followed as high because plenty of durum is available, said Marty Langton, senior trader at Viterra.
“We’ve come off of record production pretty much everywhere around the world,” Langton said at the FCC Farm Progress Forum during Canada’s Farm Progress Show last week.
“Those stocks, generally they are lower quality than we probably want to mill or that millers want to put through their plants, but there is a lot of durum out there.”
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He said the global durum crop is smaller this year, but the quality should be better.
“So you couple a lower volume or average volume crop with burdensome stocks from carry-out, and there is a lot of blending that can happen,” he said.
“So these guys are just being patient and are waiting. There is no urgency on the end use demand side to … chase the offer.”
Langton said quality sensitive buyers that usually buy No. 1 and No. 2 amber durum have been forced to make do with lower quality durum over the past few years because of the shortage of higher quality product.
“We’ve almost forced their hand to look at alternatives, and they’ve found that they can actually meet their end use product specs using a lesser quality durum,” he said.
“Will they go back to it? Sure, if we show that we can consistently supply that, but are they going to pay big premiums over lower quality grades? Probably not.”
Buyers will source the cheapest quality that they can find that still allows them to meet consumer needs, which may lessen the premium for quality durum, he said.
Vomitoxin levels have become much more important than the grade.
Farmers who decided to sit on their durum with high vomitoxin from last year will likely be happy they did so if the durum comes off this year with low vomitoxin.
“If you have a low vomi crop, a better quality crop, some of this stuff probably blends and if you can’t blend it on your own farm, I’m guessing somebody in the industry might say, ‘I can’t give you a full No. 3 amber durum value for it but I can give you a bit of a premium because we’ll take the chance on blending it,’ ” Langton said.
However, if the coming harvest is again plagued with vomitoxin, farmers might wish they had unloaded last year’s crop, even at current prices.
“If we have a high vomi crop, it’s probably not the best thing to have in the bin because you’re just going to add more quantity of poor quality grain with limited homes to the stockpile, and I can only see value softening again,” Langton said.
He said the durum market has improved but will likely hold steady near current prices through the summer and into the fall.
“There is definitely a firmer tone to the durum market, and we’ve seen some rally already. A couple months ago we were seeing No. 3 amber durum for $5.50, now we are seeing $6, $6.25 cents a bushel bids. I’m guessing that gets us through the summer,” he said.
“I don’t see a major catalyst that says durum values are going to skyrocket anytime soon, unless it just has to in order to play somewhat of a catch-up game with some of the other commodities like spring wheat that is enjoying some nice rallies right now.”
