Two dollars a bushel. That’s how much the Canadian Wheat Board is predicting durum prices will fall in the 1995-96 crop year. (Not including freight, of course.)
Actual returns in 1993-94 for No. 1 CWAD were $235.36 per tonne or $6.40 per bushel. Forecasted returns for the 1994-95 durum pool are currently at about that same price: $229-$245 a tonne.
But the board’s 1995-96 pool return outlook for No. 1 CWAD is just $159-$179 per tonne, or roughly $4.60 a bushel.
So why the big drop? “Basically, there’s better production forecast for the North Africa markets,” says Marvin Hildebrand, grains analyst with the board in Winnipeg.
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Translated, that means Algeria and Tunisia are recovering from drought that hurt their 1994 crops. Algerian production could double this year. Tunisia’s could triple.
That leaves a significant hole in world durum trade. Hildebrand said demand from the region probably added one million tonnes to the record six-million-tonne durum trade which is forecast.
World trade will likely drop below five million tonnes this year. That’s closer to normal, he said, but not enough to sustain prices, especially when the two biggest exporters in the world are set to increase acreage.
Hildebrand said durum acreage in Canada could rise to better than six million acres, still not as high as record 1989-90 plantings of 6.4 million acres.
And then there’s the United States. Hildebrand said the board’s best guess is durum planting in the U.S. could reach 3.3 million acres.
More durum production in the U.S. could be bad news. It means Canadian durum may be less competitive in the American domestic market, which even with restricted imports is still worth 350,000 tonnes this year. And, if U.S. production increases, the U.S. department of agriculture use the Export Enhancement Program to sell those bushels.
There are a couple of bright spots. Ron McDaniel, a trader with Refco Group, Ltd. in Minneapolis said farmers in Minnesota’s and North Dakota’s Red River Valley are fed up with wheat – including durum – because of vomitoxin. He said acreage may drop in that part of the Upper Great Plains, but increase further west into North Dakota and Montana. Whether the extra western acres are enough to offset the loss of high-yielding acres in the valley remains to be seen, he said.
And, acreage of European durum is likely to remain flat this coming year.
