Wednesday, June 29, 2011

Is durum on the rise...?

It has been well reported in Profarmer that northern US plains (Nth/Sth Dakota and Montana) and Southern Canadian prairies have been very bloody wet.! It all started with excess snow over the winter and now excessive rains and low temperatures exacerbating the problem.

The USDA has recently estimated that the planting of Nth Dakotas of spring wheat has reached 86%, whilst only 44% of durum wheat is in the ground. Much of the state's durum crop is in areas hit hard by flooding. North Dakota is intending to plant 1.6 million acres of durum. So with the final insurance planting date past or approaching, there is still 1.2 million acres of durum left to be planted. Most growers would take out insurance policy instead of risking sowing the crop.

It has been reported that the northwest corner of the state (largest growing region) only 21% has been planted. North Dakota on average produces about 67% of the nation's durum, whilst Montana over the border producers 15%. So really future prospects for durum isn’t that great for Nth America, so the market will be keeping a very close on this.

Stats Can (similar to our ABS) released their acreage report last week. Although intended acreage has increased from last year (4.3 million acres vs 3.15ma) the survey was done in late May, before the heavens opened and persistent rain fell diminishing any hope of the ‘intended’ acreage to be planted. At that period, growers were still optimistic about getting crops into the ground before crop insurance deadlines kicked in. Durum is typically grown along the southern regions of Saskatchewan, and that area was generally a lot wetter than normal in their spring, which caused gorwers to seek out alternative crop choices (if any at all). So really there still could be another 1 ma pulled form the final number, but we won’t find out until the final survey is done August.

Currently durum is running at a $4/bu premium over spring wheat on the world market. Durum premiums to spring wheat have increased dramatically over the past few weeks, as we have had those planting difficulties mentioned above. Delivery for durum for Nth Dakota silos for the upcoming harvest in July/August is at $14/bu or $A500/t..!

Unlike the fall in bread wheat values, durum wheat continues to remain firm, with new crop Newcastle gaining $10 over the week ($346). Durum is now at a $88 premium over the best APW MG contract, and if you include the average APH1 premium of $24/t, this represents a $64/t premium. A high spread historically. For SA, we have only been tracking new season prices for a coupe of days. Today’s best price at Port Adelaide was AWB/Cargill both on $305/t. Compared to today’s best APW MG (Viterra @ $264). The H1 premium is $18, so this bread wheat spread over durum is only +$23/t.

Taking in the above information, durum prices could really rally going forward, with low stocks in both Australian and North America as last years harvest were both curtailed by wet weather. A lot will rest on the growing prospects in Nth America and Canada, we will know further information as the season progresses.

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