Market Update January 2020

 PRODUCTION

After an abundant harvest in 2018, World durum production in 2019/20 fell due to a general global reduction in areas sown to durum and poor-quality sprouted grain recorded in the major exporters, Canada and USA. Like Canada and USA, the Russian and Kazakhstan harvests were also afflicted with rain at harvest time. Conversely, dryer conditions were experienced in Australia and Mexico. This caused a fall in production in Australia; however, Mexican production was higher thanks to irrigation and a larger growing area. Production was also down in Morocco and Turkey and the EU.

Durum production in 1920/21 is expected to increase year on year, with Strategie Grains predicting increases in most durum growing countries except Mexico and Algeria.  Production costs for Canadian farmers are currently attractive compared with soft wheat and canola, and in the USA an increase is expected after the sharp decline in 2019/20.  EU production is also expected to increase year on year. This mainly relates to Italy, where rising prices for durum in 19/20 and the growing need from the pasta and semolina sectors providing an incentive for Italian farmers.

However, in Mexico, the government has a guaranteed price plan for raw materials, including soft wheat, aimed at reducing reliance on imports and this is expected to create an expansion of the soft wheat growing area at the expense of durum. Algerian production is also expected to be down after the exceptional 2019/20 figures.

DEMAND/TRADE

Increasing demand for durum used in human/industrial sector is expected in 2020/21 resulting from a rise in demand in Turkey, Syria and Morocco. Conversely the demand for durum wheat use in the animal sector is expected to decrease compared to 2019/20 where high quantities of poorer quality, downgraded grain was used in this sector.

STOCKS

Strategie Grains predicts that world stocks will fall sharply in 2019/20 generating a tight situation for the global market after the abundant harvest of 2018/19. Canadian, US and EU inventories are already tight as a result of smaller production this year. With the continuing expansion of its grain industry and expansion of its pasta and semolina production, Turkey will become the world’s second largest importer of durum this year after Italy. Globally, the outlook for the 2020/21 marketing year is also tight with expected production growth unable to offset low carry in stocks.

LOCALLY

After exceptional initial rains, the durum growing areas of Southern NSW suffered with difficult weather conditions and a fall in production in 2019/20. SA growers, after good initial rainfall, also failed to receive the follow up rains and many crops were also hit with severe frosts late in the season. Consequently, yields have been poor, however, grain has generally been of a very good quality with high protein and generally receiving a DR1 classification. The Victorian durum growing areas, after a dry start, did receive good rainfall in May and October, and an average season has been recorded.