Market Update February 2018.

 

Marketing Year 2017/18.

World durum production was at a seven year high in 2016/17, with the major exporters recording high yields, yet generally with a low protein content.

For 2017-18, Strategie Grains predicts world durum production to be down by 3Mt year on year.

Most of the reduction corresponds with the smaller harvest in Canada due to drought. The Canadian grain was, however, of excellent quality. The Progessive Farmer publication reports that most of the Canadian crop fell within the top two grades. Durum wheat production in the US was down slightly on the excellent harvest recorded in 2016/17.  Mexico’s production also dipped this year due to mild temperatures and cooler days. Kazakhstan production increased slightly this year and North Africa produced much better crops than the drought ravaged season last year. Production in the EU, is estimated at 0.8Mt down year- on -year. Italy was hardest hit, closely followed by Greece.

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

World Trade has been sluggish in the EU and USA. Mexican durum prices have been less competitive than anticipated and as a result Canadian trade has strengthened. At the end of the 2017/18 harvest, world durum stocks are expected to be at a similar level to 2016/17.

Globally durum prices have slightly strengthened in recent weeks. This has stemmed from the absence of Mexico from the world market with Canada picking up the demand without having to decrease the price of its good quality grain. The lower Canadian dollar has also supported the value of crops on the world market.

Locally, Victorian durum growers in the Wimmera region achieved above average yields for the 2017/18 growing season. Production in the irrigated areas of Southern NSW was around average, however Northern NSW was below average on the back of dry seasonal conditions. SA was more variable but overall achieved a near average outcome.

Durum quality was typically very good across all regions, however some isolated areas experienced a downgrade due to untimely harvest rain.

Marketing year 2018/19

Strategie Grains predicts that world durum wheat production will be at 34.9Mt (+0.3Mt year-on-year). It is predicted there will be a small growth in harvested area in the EU and Canada. Growing areas in the USA is undetermined due to water availability in the Desert durum growing areas. The lack of competitiveness in Mexico will result in a fall in the projected growing area. In North Africa production in Algeria and Tunisia is expected to rise should they continue to receive timely rains, Morocco, however has received little rain and the production forecast has declined. Production in Turkey will also fall as farmers switch to more remunerative crops.

World demand is forecast to edge up slightly in 2018/19. Human and industrial demand is predicted to rise by +0.3 Mt year-on-year. It remains to be seen the actual level of consumption in animal feeds as this will depend on the final harvest volumes and quality.

Strategie Grains predicts that there will be downward pressure on durum prices in 2018/19. This is due to the significant carryout stocks in Europe, Canada and USA, and world demand is projected to rise slightly but production to rise more significantly.