It’s going to take a lot of bad luck in the Mediterranean this year to put a smile on Canadian durum farmers’ faces.
Without a big production drop there, the world will stay glutted with durum.
“We need some shortfalls to occur in the Mediterranean in the coming year to help us chew through what we have here in North America, and we do have a lot here in North America,” said Rick Steinke, the Canadian Wheat Board’s head of market analysis.
That’s because both the Mediterranean basin and North America produced far too much in recent years for the world to swallow, allowing stocks to pile up and push prices down.
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Southern Europe and North Africa built up their stocks earlier this decade, and Canada flooded the market with this year’s crop. It produced 5.9 million tonnes and with a 2.5 million tonne carry in the total supply in Canada is 8.4 million tonnes, up from 6.8 million last year and 5.9 million in 2003-04.
“We have enough in Canada to supply the world 100 percent of its durum needs,” said Steinke.
In its Dec. 22 Pool Return Outlook for 2005-06, the board left higher quality durum prices unchanged and slightly reduced most lower grades. The current PRO for No. 1, 13 percent protein CW amber durum is $196 per tonne while the final price for the same grade in 2004-05 was $214.
The 2005 Mediterranean harvest was lower than consumers there needed, by about 600,000 tonnes, but that was more than made up for by North America’s 1.3 million tonne increase over the year before.
“That makes for an environment that’s fairly flat and tough as we move forward,” said Steinke.
The good news, from a Canadian perspective, is that acreage is down in Spain and Italy, as producers there react to lower EU subsidies on durum.
“The durum area was being artificially inflated in Europe because of the subsidy regime,” said Steinke.
Dry weather in Spain and Portugal has also improved the outlook for Canadian exporters, but Italy does not have moisture problems. European durum crops are now in a slow-growth stage.
Syria’s durum region is also dry, but it probably has enough in its irrigation system to carry a crop to harvest, said wheat board weather analyst Bruce Burnett.
The crucial area for the durum market is North Africa, which produces and consumes huge amounts. Crops there are seeded and slowly developing. By February the returning sun will put them in the fast growth stage, taping moisture reserves. He said eastern Algeria and Tunisia appear to have good moisture, but Morocco and western Algeria appear dry.
Continuing dryness could lower production and allow durum supplies to fall, but adequate rainfall would produce good crops adding to the glutted situation. For prairie farmers, another issue is the continued strength of the Canadian dollar against the price-setting U.S. dollar.
“The outlook is flat to down,” said Steinke.
