Canada Markets

A look Ahead at Potential 2015 Durum Production

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Here is a look at the combined Canada/U.S. durum production over the past 10 years, with the blue bars representing Canadian production and the red bars indicating U.S. production, including an estimate for 2015 based on current acreage estimates. Based on average yields over the past five years, 2015/16 production would exceed the long-term average production of 6.79 million tons. (DTN graphic by Nick Scalise)

A Dow Jones report released March 26 cited weak durum markets as buyers look ahead to the potential for the 2015 crop. Canadian prices were reported in the $8.25 to $9 per bushel level across the Prairies, while DTN's National Durum Index was reported at $8.57/bu. in the U.S. March 26, having traded sideways since Feb. 17 and remains well below the high of $13.33/bu. high reached on Nov. 4.

The March 26 release from the CWB is another grave reminder of expectations for continued pressure on the durum market, with commentary suggesting conditions in Europe and North Africa to be "decent" while markets are counting on an expansion of acres in both Canada and the U.S.

The trend of the 2015/16 Pool Return Outlook in the Annual Pool is undoubtedly based on this expected increase in production. While the last published 2014/15 Annual Pool PRO was released Dec. 18 at $463/metric ton (1 CWAD 13% protein) in store either Vancouver or the St Lawrence, new crop PROs are showing a sharp decline. The first Annual Pool PRO was released on Jan. 12 at $433/mt (1 CWAD 13% protein), lowered to $386/mt Feb. 26 and again May 26 to $351/mt. This represents a $112/mt ($3.05/bu) drop from 2014/15 to 2015/16.

The attached chart indicates the 10-year trend in durum production in Canada and the United States, with the horizontal black line indicating the 10-year average production at 6.79 million metric tons.

The question remains how farmers will respond to the past year's market dynamics when making new crop planting decisions. While the USDA will release their first look at 2015 acres on March 31 with its Prospective Planting report, Statistics Canada will not release its 2015 projections until April 23 with its Principal Field Crop Areas report.

Projections for 2015 on this chart are based on the following assumptions:

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-- U.S. farmers will plant 1.73 million acres, an increase of 23.6%, which is based on the average of Dow Jones pre-report estimates;

-- U.S. yield will be 39.9 bushels per acre, the five-year average;

-- the percent harvested will be based on the average of the past five years;

-Canadian producers will plant 5.33 million acres, an average of three existing trade estimates, an increase of 12.2% from last year;

- average yield will be 40.2 bpa, also based on the five-year average, as is the percent of harvested acres.

As a result, total projected production of 7.56 mmt between the two countries (5.74 mmt in Canada and 1.82 mmt in the U.S.) would be well above the 10-year average of 6.79 mmt.

One interesting point to note is seen in the yearly weighted-average farm price reported by the USDA, while focusing on the four years between 2005 and 2014 when durum production was above the 10-year average which includes 2005, 2008, 2009 and 2013. In 2005/06, the average producer price was reported at $3.46/bu., or $.39 ($14.33/mt) below the previous year. In 2008/09, the average bid of $9.26/bu. was $.66/mt or $24.25/mt below the previous year. In 2009/10, the average farmer price of $5.47/bu. was $3.79/bu. or $139.26/mt below the previous year. In 2013/14, the weighted average farmer price of $7.46/bu. was $.72 or $26.46/mt below the previous year.

As seen here, years resulting in large combined crops over the past 10 years did not necessarily lead to a significant deterioration in price, but the move from 2008/09 to 2009/10 shows that the possibility of a large set-back in price does exist.


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

Follow Cliff Jamieson on Twitter @CliffJamieson

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