Morocco’s durum crop is a wreck, which creates a significant export opportunity for the coming Canadian crop.
The U.S. Department of Agriculture’s attache in Morocco is forecasting 993,133 tonnes of production in 2016, which is down 59 percent from the previous year.
“They’re in the grips of a serious drought,” said Bruce Burnett, G3’s weather and crop specialist.
Morocco is expected to import three million tonnes of wheat and durum in 2015-16, and imports will likely rise to 3.9 million in 2016-17.
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Europe and the Black Sea region supply most of the wheat, and Canada is the sole supplier of durum.
Burnett said Morocco imports high quality durum, which is why it likes to buy Canadian product.
Millers and wheat importers in the North African country have asked the government to delay the usual April 30 implementation of durum import tariffs to the end of May because of the short crop.
Morocco’s imports don’t fluctuate much, even in dry years, but this will be an exception to the rule.
“This is a very substantial drought, so we’re probably going to see some increase in demand,” he said.
It is one of the reasons why he is forecasting strong demand for Canadian durum and a continued price premium over spring wheat.
Durum prices are currently under pressure from sales of the Mexican crop.
“I think prices, after this dip, are probably going to strengthen here, especially if we see some weather difficulties,” said Burnett.
He expects that 2015-16 Canadian durum carryout will be tight at one million tonnes because of a good export program.
Burnett believes tight carryout and strong expected demand will give durum prices a premium of 50 cents to $1 per bushel over spring wheat, even if Canadian production ends up bigger than last year.
The drought is not nearly as dire in Algeria and Tunisia, although neither country will produce bin-busting crops. Production will be similar to last year’s drought-reduced harvests.
Western Algeria has been hit by the same crippling drought as Morocco. Most of the durum is grown in the east, where there has been better rainfall, but there are important pockets of production in the west.
The USDA forecasts 2.7 million tonnes of total wheat production in Algeria, which is the same amount as last year. Wheat imports are forecast to fall to seven million tonnes in 2016-17 from 8.2 million tonnes.
Tunisia is expected to produce 1.1 million tonnes of total wheat, up slightly from last year’s drought-reduced 910,000 tonnes. Imports are forecast to fall to 1.7 million tonnes from two million tonnes in 2015-16.
Crop development in Algeria and Tunisia is further behind Morocco.
“The question now is how the crop is going to finish in April and early May,” he said.
Crop damage could be as bad as in Morocco if temperatures rise in April.
The European Union is the other big production region to watch. The International Grains Council expects EU production to reach a six-year high of 8.7 million tonnes because of increased plantings and favourable growing conditions.
Burnett said there is good soil moisture in France, Italy and Greece, but Spain is suffering from the same dry conditions as Morocco. There is still time for the EU crop to be stressed or to receive welcome rain before harvest.
Turkey is also on the dry side.
Burnett believes the global situation adds up to strong demand prospects for Canada’s coming durum crop.
“The missing piece to all of this puzzle right now is the quality because those countries are still all left to harvest yet,” he said.
The quality of the EU crop, in particular, can have a major influence on Canadian durum demand, but that won’t be known until June.
North American seeded acreage is the other big market factor. The USDA reports that American growers plan to increase acres by three percent.
Burnett thinks the increase will be about the same in Canada. Statistics Canada’s seeding intentions report will be released April 21.
