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WMR-Durum Diverges from Other Wheat Classes

By: Jim Peterson
Posted: Sep 13 2023

The world durum supply situation has tightened dramatically since the early summer period, in contrast  to overall world wheat.  World durum production is currently pegged at 1.12 billion bushels, the smallest crop in more than 20 years, and 7% less than a year ago.  Late spring estimates projected for a crop larger than a year ago.

Production began to tighten in the late spring on expanding drought conditions across North Africa, as well as parts of the EU durum growing region.  In other areas of the EU durum growing region, heavy rains prior to and during harvest greatly reduced the portion that was milling quality.  In North America, Mexico, Canada and the U.S. are all looking at lower production than a year ago, with the most precipitous decline in Canada.  In both Canada and the U.S., crops had decent soil moisture in May and early June, but conditions turned progressively drier into late June and through much of July.  

The most recent Statistics Canada report, released at the end of August, but based on July conditions, estimated the yield at 26.8 bushels per acre, a 25% drop from a year ago, and well below trend-line yields.  Their production is estimated at 156 million bushels, well below the 2022 crop of 213 million bushels, on similar acreage.  Early season estimates were closer to 200 million bushels.  A follow-up estimate will be released on September 14, and that will be based on August models of crop conditions.  

In the U.S. production is pegged at 57 million bushels, with current USDA yield estimates at 28 bushels per acre in Montana and 35 bushels per acre in North Dakota.  Early harvest results from producers are indicating better than expected yields in many areas, with above average yields in southwest North Dakota.  Expectations are that final yield estimates may move higher in both states, but the level of increase will be tempered by the fact that many yields in northeast Montana and northwest North Dakota, where the vast majority of U.S. durum is grown, remained below trend-line. 

Harvest of both the U.S. and Canadian durum crops was around the half way point at the start of September, so the final production and quality profile of the crops is still being determined, and a high level of uncertainty remains.  In the U.S. many areas are reporting good quality, but the quality is more variable than recent years, with pockets of lower vitreous kernels, some areas of lower protein levels, and some areas of lighter test weights.   If quality is lower than expected on the yet to be harvested fields, it will only add to the tightness.  In Canada, there are also reports of some variability in grade quality, but the sheer drop in production since June is the dominant variable in their market. 

World trade in durum will be lower than last year and below the five-year average, simply due to the fact that Canada will need to curtail exports.  Last year they exported 190 million bushels, well above current production.  Demand will also be curtailed to some degree by demand rationing due to both price and availability, as well as substitution of non-durum wheat for certain pasta products, where allowable.  In many markets, non-durum wheat prices are 35% lower.  Many longtime customers of durum for pasta or couscous will still demand durum however.

In the near term, some greater than expected export volume from both Turkey and Russia has met some of the nearby demand in Europe, and Turkey touts it plans to fill much of the void left by Canada.  Time will tell.   USDA is projecting stronger exports for U.S. durum, and current sales are about 50% stronger than a year ago.  

The accompanying chart illustrates the recent trends, and current projections for ending stocks of durum in the EU, Canada and the United States, based on International Grains Council forecasts.  While it is only one projection, and some private sources say stocks are not that tight in the EU, it clearly shows the potential tightness facing the world durum supply over the next nine months.  World durum ending stocks could reach 30 year lows, depending on how much demand rationing takes place, with Canada and the EU at historical lows.

Durum prices moved sharply higher in August, reaching as high as $11.50 per bushel at local elevators.  Similar price increases were also seen in Europe.  Prices have declined into September, due to the unanticipated volume of durum exports from Turkey and Russia, and harvest progress in the U.S. and Canada, stabilizing near the $10 per bushel level, locally.  Prices look to remain volatile going forward, as the final production and quality of the U.S. and Canadian crops remains uncertain, and buyers are still adjusting to the sharply tighter supply situation than anticipated just 3 months ago.

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