Good quality milling durum prices are expected to further increase, as a significant portion of the Canadian and U.S. crops continues to languish in the field.
As of this past Sunday, more than 20% of the durum in the No. 1 production state of North Dakota was still out in the field, while more than 40% was still out in Saskatchewan as of early last week. Meanwhile, further harvest progress looks bleak in the near-term with North Dakota and parts of Saskatchewan expected to see snow into the weekend.
Erica Olson, marketing specialist with the North Dakota Wheat Commission, said a good portion of the crop in that state did come off in good condition prior to heavy rain and snow. But with overall production down on both sides of the border and quality poor on any later-harvested crop, top quality supplies are tightening.
“Going forward, we’re expecting prices for the highest quality top milling grades to continue to increase,” Olson said.
Indeed, Jerry Klassen, manager of Canadian operations with Swiss-based GAP S.A. Grains and Products in Winnipeg, estimated that only about 30% of this year’s Canadian durum crop will grade as a No. 1 or 2. Another 30% may grade as a No. 3 while the remainder will be a No. 4 or lower, he said.
“There will be some blending, there’s no doubt about it,” Klassen said.
For the first half of the crop year, Klassen said the No. 1 and 2 grades will likely carry a “significant” premium over the No. 3. However, he said he expects that premium to narrow into the second half of the year as the grain companies adjust their positions.
Durum bids in North Dakota are currently topping out at about US$6/bu, which represents an improvement of about $1.20 over the past month. Canadian prices have also rallied over the past month, with posted bids for milling quality in the C$8 to $8.50 area.
Klassen said the current strength in durum prices is tied to commercial traders in the middle, with large sales on the books they now need to cover. That previously contracted business will be filled early in the new calendar year. At that time the market will likely shift as the end users will then also face tighter supplies and higher prices, he said.
Lower quality durum will likely end up in domestic feed channels, but Klassen said the Southeast Asian fish feeding market has also been a buyer in the past. They will buy feed durum with higher protein levels, but that market may not be as strong this year due to lower average protein.
Canadian durum production for this year is estimated at about 5 million tonnes, down 13% from 2018. The American crop is pegged at 1.56 million tonnes, a drop of about a half million tonnes from a year earlier.
Source: DePutter Publishing Ltd.
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