Durum stocks dwindle as exports pick up

Producers are expected to delay planting decisions until they see how markets respond over the next several months

Exports of Canadian durum have picked up considerably in the past six months and could push Canada’s ending durum stocks to their lowest level in years.

But it remains to be seen whether low domestic ending stocks — potentially below a million tonnes — will entice western Canadian growers to increase durum plantings this spring.

Western Canadian growers are likely to hold off on making durum planting decisions until they see how markets respond over the next month or two, industry experts said.

Producers will also pay close attention to the price spread between Canada western amber durum and Canada western red spring wheat, as well as planting intentions in the United States.

“North American ending stocks project to be their smallest since 2007-08, so heading into next year we won’t have a huge buffer of durum either in Canada or the U.S.,” said Neil Townsend, chief market analyst with FarmLink Marketing Solutions.

“Another market-moving (factor) is that it looks like Mexico is moving out … of the durum export market. The (Mexican) government is really promoting people growing bread wheat that they can trade into the Mexican market as opposed to durum that they trade into the world market.”

Townsend, who spoke to growers Jan. 30 at the 2020 Durum Summit in Swift Current, Sask., said U.S. desert durum acres grown in Arizona and California have also gone down precipitously over the past few years as producers there opt for higher value crops such as vegetables.

Production in Kazakhstan, which supplies durum to Turkey and Italy, is also down, he added.

The result is increasing demand from other exporting nations, including Canada.

According to the most recent figures supplied by Statistics Canada, domestic durum stocks on Canadian farms and in the commercial grain-handling system were just a hair more than 4.5 million tonnes as of December 2019.

That’s almost a million tonnes lower than December 2018, when stocks stood at nearly 5.5 million tonnes.

Cam Dahl, president of Cereals Canada, said steady export sales to Turkey have been eating away at Canadian stocks.

Canada shipped more than 705,000 tonnes of durum to Turkey during the last five months of the 2019 calendar year, compared to 133,000 tonnes during the same five-month period a year earlier.

A small Turkish crop combined with affordable prices has boosted sales to Turkey, which is now the largest buyer of Canadian durum.

“Right now, we’re seeing attractive durum prices from a buying perspective, not so much from a selling perspective, and I think that’s been the biggest driver (behind sales to Turkey),” Dahl said.

Italian buyers have also resumed buying Canadian durum amid tightening global supplies.

Crop-year-to-date exports to Italy were pegged at 438,000 tonnes as of December 2019, compared with 188,000 tonnes a year earlier.

Dahl said Canada is on pace to export between 4.5 and five million tonnes of durum in the 12-month period ending July 31, 2020.

“That’s in line with what Agriculture and Agri-Food Canada was projecting in their December outlook,” Dahl said.

“They were forecasting exports in the range of 4.8 (million tonnes) … so that would leave some very tight stocks. If we do reach that export level, there’s not going to be a whole lot left in the bin, and of course Canada supplies over 50 percent of the world market for durum, so that’s going to leave very tight stocks as well, so that likely will have an impact on price.”

Despite what appears to be a favourable market outlook, both Dahl and Townsend said it remains to be seen how declining global stocks will affect planting decisions this spring.

In Swift Current, Townsend suggested that that western Canadian plantings could increase by as much as 10 percent.

But if the spread between domestic spring wheat prices and durum prices is too narrow, the appeal of planting durum will diminish.

He said a price spread of at least 40 to 50 cents per bushel will be needed before some growers take a look at durum.

“We’ll see going in whether or not (tight stocks) … are going to impact farmers’ seeding decisions,” added Dahl.

“I think it will really depend on what farmers are seeing for prices in the next few months. If the result … is an uptick in prices, then I think Canadian farmers will respond, but I’m not sure we’re able to make that assessment quite yet.”

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