Market Update April 2018.



Marketing Year 2017/18

World durum production in 2017/18 is estimated by Strategie Grains at 34.6Mt, down more than 3Mt from the high levels of 2016/17. This production fall was mainly recorded in the major durum exporting countries (Canada, USA and the EU), conversely, the main importing countries (Morocco, Tunisia and Algeria) recorded increased production.

Strategie Grains predicts global demand for durum to be down 2mt year-on -year. Due to the smaller global harvest and better-quality grain, quantities used in the animal feed sector is expected to reduce. However, durum wheat use in food production for humans is projected to rise slightly. The increase in demand stems from higher consumption in North Africa of their self-produced grain.

World Trade has remained sluggish in recent months and this can be attributed to three factors; sluggish purchasing activity from Italy and Algeria, the existence of ample carryout stocks in Canada, US and EU, and by the good crop outlook worldwide.

The world’s largest Italian pasta maker, Barilla, says it has had to cutback Canadian imports of durum wheat by 35 per cent, despite the fact Canadian durum wheat is of exceptional quality. Barilla’s purchasing director Emilio Ferrari told grain groups in Toronto last week that no contracts for Canadian durum are being signed right now.

The reason is that some Italian consumers are fearful Canadian wheat has been “poisoned” because it tested positive for traces of glyphosate. Italian farmers have capitalized on this in an attempt to dissuade foreign imports.

A further impediment to trade between Canada and Italy is the simmering trade dispute stemming from a “Made in Italy” country of origin label. The policy, which was set to take effect in mid-February, requires processors to identify where their durum wheat was grown and milled into the semolina flour used to make pasta. Canadian farm groups want the policy challenged at the World Trade Organization, arguing it discriminates against Canadian product.

World durum stocks remain stable. Despite a smaller harvest in the US and Canada, carry out stocks remain stable taking into account the sharp rise at the end of 2016/17. Carry out stock in the EU is also flat. Italy is in a state of equilibrium and France and Spain have both retained a large surplus. Carryout stock in Mexico however is expected to fall due to their smaller harvest and high demand for animal feed.

Marketing year 2018/19

For the 2018/18 campaign, Strategie Grains predicts that world durum wheat production will be at 35.3Mt (+0.1Mt year-on-year). In the EU, projected durum production is expected to be the same as in 2017/18. In the main European growing regions, plants are rated as in a good condition. Strategie Grains predicts there will be a 7% growth in harvested area in Canada, tempering that however, is a report in The Progressive Farmer publication by Grains Analyst Cliff Jamieson, suggesting that spring wheat acres are expected to rise significantly at the expense of durum acres. In the US, Strategie Grains predicts planting of Durum wheat should remain stable, however there will be a decrease in plantings of desert durum. Conversely, The USDA suggests a 13% drop from 2017/18 and analyst Mary Kennedy, suggests that the durum growing area in the US will fall by 20%, the lowest in four years. This may be due to the narrowest spread in four years between the National Spring Wheat Index and the National Durum Wheat Index.

In North Africa, smaller growing areas are reported in Tunisia and Morocco however yields are on track with good rains to date. Algeria experienced good rains initially, however it has fallen off recently. This may all change however in 2019. The Arab Weekly reports that the Agriculture Minister, Abdelkader Bouazghi, announced that by the end of 2019, 25% of its arable land will be irrigated. The scheme proposes to modernise the farming sector, cut food imports and create jobs, and reach self-sufficiency in durum production. It is proposed that Algeria will have 2 million hectares irrigated by the end of 2019. The country has built more dams and reservoirs, installed 11 desalination plants and 176 waste water treatment plants.

Locally, most durum growing areas in South Australia, Victoria and NSW are all waiting for a good soaking rain. With limited short-term relief from this current dry period, growers looking for an early plant will be faced with a difficult decision to proceed or otherwise with no moisture profile.