Wheat growers making their 2007 cropping plans may want to keep an eye on the weather in Algeria.
Farmers in that North African country are now planting their durum wheat, and dry conditions are expected to result in fewer acres and reduced production.
That could bode well for the price outlook for the durum that will go in the ground next spring in Western Canada.
“It’s early days, but the signals, unlike last year when they were negative at this time, are positive,” said Rick Steinke, director of market analysis for the Canadian Wheat Board. “As a farmer selling durum, I’d be optimistic.”
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The combination of dryness in important producing and consuming areas like Algeria, Tunisia and Italy, and continuing pressure on durum acreage in the United States due to market and subsidy-based incentives to grow other crops, add up to a positive long-term outlook.
Steinke expects seeded acres in Algeria to drop by at least five percent and possibly more, depending on moisture.
Algeria is expected to import about 1.7 million tonnes in the current 2006-07 marketing year, down from 1.9 million the previous year. Canada normally supplies 700,000 to 800,000 tonnes of that total.
Morocco, which typically imports about 600,000 tonnes annually, with Canada supplying around 485,000 tonnes, is not experiencing the same dry conditions as Algeria.
Even if it was, a combination of logistical and administrative issues means Morocco’s imports tend to remain steady regardless of domestic production levels.
Italy, another major durum market for Canada, is also dry. Some forecasters have predicted an increase in acreage of 20 to 25 percent, in response to good prices.
However, Steinke is skeptical as to whether plantings will actually increase by that much due to the dryness.
As for the U.S., Steinke said the prospects for future sales to that country are strong.
U.S. durum production last year of 1.5 million tonnes fell far short of domestic demand of 2.1 million tonnes. That shortfall could become a permanent feature of the market, as U.S. durum acreage is switched to corn, soybeans and canola in response to growing demand for biofuel and government programs that favour those alternative crops.
For the current 2006-07 marketing year, the latest market outlook from Agriculture Canada projects durum exports of 4.25 million tonnes, slightly below last year’s record 4.27 million tonnes.
With total supplies down by 1.4 million tonnes this year, that level of exports will draw ending stocks down to two million tonnes, sharply lower than 3.3 million tonnes a year ago, but on par with the 10-year average.
The CWB’s pool return outlook for 2006-07 forecasts a durum price of $210 a tonne (basis export position) for No. 1 CWAD 13 percent protein.
