Global shortages not likely severe enough to send prices soaring, but markets are still favourable
Durum growers in Saskatchewan and Alberta will probably benefit from relatively strong market conditions in the months ahead, says a market analyst.
On-farm inventories across the West are still relatively tight and producers in other major durum-producing countries such as the United States and Morocco are also facing drought-related production challenges, said Chuck Penner, market analyst with LeftField Commodity Research.
However, the severe supply shortages that fuelled record durum values last year likely won’t be repeated in 2023.
“We’re not in a 2021-22 situation anymore,” said Penner, who spoke to farmers at CropWeek in Saskatoon earlier this month.
Read Also
USDA’s August corn yield estimates are bearish
The yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn.
“Do I think there’s room for upside in durum prices? Yes. Do I think they’ll scream higher? No.”
Penner offered a generally favourable market prognosis for western Canadian durum producers.
Last year’s durum harvest produced some pretty good volumes, he said, but total production was still below average and drought concerns are still top of mind for growers in many regions of western and southwestern Saskatchewan.
Canadian growers took off an estimated 5.4 million tonnes of durum last fall, “a pretty nice crop” but less than the average pre-drought harvest of around six million tonnes.
Carry-out supplies as of Aug. 1, 2022, were well below normal, and last fall’s sub-average crop contributed to a tight supply and demand situation.
Foreign production problems also contributed to price-supportive market factors, Penner said.
Like their neighbours on the Canadian Prairies, Montana durum growers were affected by poor moisture conditions in 2022.
As a result, the U.S. Department of Agriculture is projecting American durum imports at 45 million bushels in 2023.
That would be the country’s largest durum import program since 2018-19, Penner said.
Growers in Europe and North Africa have also faced production issues.
Durum producers in Europe expected a huge crop early in the production cycle, but the promising start didn’t pan out by the end of the year.
North African supplies are also tight, following a disappointing harvest in Morocco and strong import demand from Tunisia and Algeria.
Moroccan import tariffs, which are typically put in place to limit imports of foreign-grown durum, were not implemented last year because domestic supplies were running on empty.
“Morocco had a crop failure, an absolute crop failure last year, and so … North African total production is down sharply … the lowest since 2016.
“Tunisia has been tendering and Algeria has been tendering, so it’s a strong picture” in terms of market support, Penner said.
Mexico was one of the few durum-producing countries that had a good crop.
It’s last durum harvest was the largest in five years.
Penner said Canada’s durum export program started slow, but the pace quickened considerably by November.
Market conditions are typically strongest in November, and farmer deliveries are normally expected to slow early in the calendar year as Great Lakes shipping routes close.
Despite some “mostly sideways” market movement over the past month or two, conditions could be setting up for some relatively firm prices heading into the spring season.
Amid tight Canadian supplies, low ending stocks, stronger-than-normal demand from Europe and Africa and the potential for another poor crop in Morocco, sellers in Canada can expect to see steady to stronger market signals in the months ahead.
In Morocco, where durum planting takes place in November, December rainfall has been limited and crops are off to a poor start.
“There’s no relief showing up there either, so they’re setting up for maybe a smaller crop again,” Penner said.
In durum producing countries around the world, there’s no room for another crop failure, he added.
