The prairie durum market continues to develop and evolve, but only in fits and starts.
Farmers still aren’t sure how they’re going to price durum in the future, advisers say. Will it trade like a big crop listed on futures markets or like a smaller crop that relies on cash trade?
“It’s jerky,” said Derek Squair, manager of Agri-Trend Marketing. “It’s been pretty jerky post-wheat board.”
Jon Driedger of FarmLink Marketing had a similar view.
“It’s not a lot different than selling flax or peas,” he said.
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“It trades just like any other market that doesn’t have a futures market.”
ICE Futures Canada lists a durum futures contract, but it rarely trades, so the cash market is the only real price discovery mechanism.
That means prices can vary substantially from buyer to buyer, depending on their processing needs or the commercial sales they have made.
Grain elevators generally post cash prices for durum and occasionally offer new crop prices.
However, Driedger said most elevator companies haven’t tended to offer futures-linked contracts, which makes sense because it’s hard to find a wheat futures contract that follows cash durum prices closely enough.
“That durum-Minneapolis wheat contract relationship can be really volatile,” said Driedger.
It means most durum hedging is done with flat price sales, and farmers don’t mind leaving lots of new crop durum unpriced.
“They’re used to being patient and maybe carrying it over if they don’t like the price,” said Driedger.
“Most durum growers are used to growing it and sitting on it.”
It makes durum similar to special crops such as flax and peas.
Squair said his firm has dealt with the sporadic nature of durum bids by finding buyers and organizing transportation. It has been working with U.S. durum mills, terminals in Thunder Bay and offshore buyers who want to take possession at Vancouver.
The demand and prices from these places can vary, so it takes a bit of work to find the best price and get it to the destination.
“We’re arbitraging that all the time, making sure that we’re looking at U.S. prices and working that back to Canadian (prairie elevator) prices and making sure that’s competitive to what we can get if we were to do the logistics on it,” said Squair.
He said he also uses Kansas City hard red winter wheat futures and Chicago soft red winter wheat futures as hedging mechanisms, especially for new crop that can’t be easily priced.
Pricing and hedging durum can be a workout.
“We’ll see offers, then they’ll disappear. We don’t see anyone really building longs or any sort of a position,” said Squair.
Driedger said the final status of durum marketing is still unclear, with the crop being similar to special crops in some ways and to a futures-based crop like wheat in other ways. However, not many farmers are complaining because they have been making money.
“Guys have done pretty good with durum this year,” said Driedger.
“Most guys have been able to sell it around eight bucks plus. Growers respond to that.”
