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WMR-Adverse Weather Impacts Durum

By: Jim Peterson
Posted: Sep 24 2019

The 2019 U.S. durum situation has become more price volatile as significant rains in September impact both U.S. and Canadian quality.  While overall supplies remain relatively large, due to carryover stocks from 2018 crop, and strong 2019 yields, the availability of the highest quality grades and hard counts, is acutely tighter than anticipated prior to harvest.   

There are certainly a number of reports of high quality durum which has been harvested, but a growing share of the crop is pushing toward feed quality.  Prices for top-end quality are appreciating, but mid-September prices were muted by extended coverage by domestic mills.  

Prices are up significantly in Canada, with some bids equating to over $6 in U.S. currency.  Canadian carryover supplies from 2018 are a bit tighter than U.S. inventories, their 2019 harvest is further behind, and some market participants feel Canada has been more aggressive pre-selling their 2019 crop, leaving sellers short. Canadian production is currently estimated at 183 million bushels, about 15 percent lower than their five-year average. 

The most recent supply estimate for U.S. durum, according to USDA, showed June 1 beginning stocks at 55 million bushels, production of 57 million and potential imports of 56 million.  This keeps supplies nearly the same as a year ago.  Depending on the final outcome of the 2019 U.S. and Canadian harvests, there are likely to be notable shifts in projected imports, and U.S. production may need to be trimmed as some acres will not be harvested.   
On the demand side, overall use is projected higher, largely due to increased exports.  The first three months of the marketing year have already captured strong export sales, 18 million bushels sold as of the end of August, nearly double the pace of a year ago.  Demand from Europe is higher due to some protein shortfalls in their domestic crop, and other quality issues.  U.S. domestic food use is likely to remain stable, even with higher trending durum values, but adjustments may be needed to reflect the higher feed use of durum.    

The potential for lower supply forecasts, and growing demand, should lead to lower June 2020 ending inventory projections, currently at 54 million bushels.  How much tighter will depend on the final quality and production of the U.S. and Canadian crops.  The record setting rains in September have certainly shifted the dynamics in 2019, likely adding significant value to the highest quality stocks, but causing notable losses for many producers and increasing the uncertainty in a market which had been tranquil for many months.

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