Canada Markets

Durum Market Remains Steady

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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A current snapshot of durum bids seen at select points on both sides of the border indicates the challenges faced by prairie growers as a result of the transportation issues faced. (DTN graphic by Nick Scalise)

Steady as she goes may be the only way to describe the current durum market. DTN's National Durum Index, created from daily price data from the northern states, has ranged from a low of $6.59 per bushel to a high of $6.88/bu since Sept. 1, with the average at $6.74/bu. The low of $6.59/bu was reached earlier this week, although the index has popped up nearly a dime since.

The durum market has disappointed in 2014, failing to participate in the rally that saw spring wheat move from a low of $5.94 1/2/bu (May future) to a high of $7.70/bu. During this time, the spread between the National Durum Index and the National Spring Wheat Index in the U.S. moved from a premium of 71 cents/bu (durum over spring wheat) on Jan. 30 to a discount of 60 cents on March 24 (spring wheat over durum), although durum has since regained a slight premium of 6 cents/bu in recent trade.

Looking at the spread chart for the National Durum Index less the National Spring Wheat Index, the spread has recovered slightly more than 50% of the Jan. 30 to March 24 downtrend, which is a common Fibonacci retracement level watched by market technicians, although this recovery has stalled at this level in recent days.

Besides the fact that durum failed to respond to the spring wheat rally, transportation issues on both sides of the border drove cash prices at eastern U.S. mills as high as $15/bu in past weeks as some mills struggled for supplies, while cash prices in the country failed to respond.

Without a shock on the demand side, markets will continue to focus on available supplies. Agriculture Canada's current estimate has pegged the 2013/14 carryout at 2.3 million metric tonnes, which is 100% higher than the 1.152 mmt carried out of 2013 and 52% above the five-year average of 1.78 mmt.

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The April WASDE report released earlier this week reduced the 2013/14 carryout by 4 million bushels to 22 mb based on lower imports, which is just 1 mb below the 2012/13 ending stocks and 23% below the five-year average carryout of 28.6 mb. The forecast for the combined U.S. and Canadian carryout is 1 mmt greater than seen in 2012/13.

While Stats Canada first look at seeding intentions are due to come out later this month, Agriculture Canada's early estimates for 2014 seeded acres has indicated a 5.9% drop in seeded acres, a drop of 294,000 acres to 4.670 million acres, as producers respond to the lower prices and lack of movement for the crop on the prairies. Supplies are expected to tighten, however, with early estimates suggesting a yield which more closely resembles the five-year average of 36.3 bushels/acre as opposed to last year's prairie yield of 48.4.

Meanwhile, USDA has indicated in their Prospective Plantings report that U.S. acres will increase 22% to 1.799 million acres, a 329,000 acre increase over last year. This is largely due to a 38% increase in acres seen in North Dakota due to the challenging 2013/14 growing season. Based on current numbers, buyers may be at ease knowing that ending stocks are increasing, while seeded acres in North America could remain steady.

In industry news, the North Dakota Wheat Commission reports that U.S. pasta consumption increased 1% in 2013 after many years of stagnant growth. This was seen on a year when the challenging domestic economy lead to a decline in consumption seen in many of the other food categories.


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Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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