Market Update September 2020

PRODUCTION

After the lowest global production of durum for five years in 2019/20, production in 20/21 is expected to increase sharply year on year, however, the durum wheat market should remain tight.

The sharp increase in production from last season can be primarily attributed to Canada where Statistics Canada estimate the total wheat production to increase by 5.6 %, thanks largely to the higher output of durum and winter wheat. As of September 24, 95% of the durum crop had been harvested and this early harvest has had a positive impact on quality. In the USA harvest is also progressing well and quality has been good. Production increases are also expected in Australia, Turkey, and Kazakhstan.

Reductions in production, however, are anticipated in the EU, North Africa, and Mexico. Production in the EU has been on a downward trend since 2016. Area planted to durum was very similar to that of last year, however yield was 4% lower than the five-year average. Only France and Germany saw an increase in durum production with falls in Italy, Hungary, Bulgaria, Slovakia and Spain. It is expected that the EU will need to increase imports of durum wheat this year to rebuild stockpiles.

In North Africa, Algerian production is still expected to be lower than the very good harvest of 2019, despite good yields.  Tunisia is also expected to record lower durum production than last year. But it is in Morocco where production is expected to dramatically fall. A harsh drought has resulted in the worst durum production numbers since 2007.

DEMAND/TRADE

World usage is expected to decrease for durum wheat. This fall will reflect a decrease in demand from the peak observed in response to the coronavirus wave of panic buying last year. This however could change with the development of a COVID -19 second wave. If large scale lockdowns are reintroduced around the world, production of pasta and semolina could again increase in response to demand generated from new spells of confinement.

 STOCKS

Worldwide, stock inventories are expected lower than in 19/20 despite the strong harvests in Canada, USA and potentially Australia. Despite this increase, it is not sufficient to offset the very low carry in stock at the beginning of the season. On a world trade level, this should maintain buoyant global pricing.

LOCALLY

In Australia, Durum production in 20/21 is forecast to dramatically rebound from the lows of the 19-20 East Coast drought, with some commentators anticipating a return to long term average production of around 500,000mt. With favourable opening rains, very strong price signals ($100 premium over bread wheat) and a desire to switch away from barley, the only restriction on more area being planted to durum in some locations was the inability to access seed.

From a seasonal perspective, NSW has enjoyed a very strong season, particularly in Southern NSW with some dryland crops having the potential to be 50-100% above average. In Victoria and South Australia crop potential was hampered by a dry period through June and July however crops have now received very useful Spring rains which should now ensure average outcomes for most.

With a return to a strong Australian export surplus position, key exporters have been proactive. Trade reports suggest that 3 cargo’s (around 120,000mt) have already been secured with the premium Italian market being the current target market.