Market Update November 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, USA, (up 30% from the previous year), Australia, Syria, Turkey and Kazakhstan. The quality of most of the grain in the USA and Canada has been classified in the highest grade.

Production in the EU has been on a downward trend since 2016. This year it can be attributed to a down grading of grain in southwest France, a smaller growing area in central Europe and too much winter rain in Hungary and a lack of rain in Bulgaria and Romania. By contrast, production was higher in Germany, Greece, and Spain.

Production decreases were also experienced in North Africa, due to drought during the cropping cycle and Mexico, who recorded a reduction in the planted area.

DEMAND/TRADE

Strategie Grains predicts that the demand for durum use in human consumption will increase sharply from last year. This is as a direct response to the surge in demand  for semolina and pasta created by the global pandemic. The demand may not be at the levels of the first wave of the virus as lockdowns are less restrictive worldwide, however, these restrictions may extend for longer.

Demand for durum use in the animal feeds sector is expected to fall as the general quality of the 20/21 crop is high. The only exception to this is in France where grain has been downgraded as a result mycotoxin.

STOCKS

Worldwide, stock inventories are expected lower than in 19/20 despite the strong harvests in Canada, USA and the anticipated Australian harvest. Despite this increase, it is not sufficient to offset the very low carry in stock at the beginning of the season. The EU will be dependent on imports to meet domestic demand and rebuild stockpiles. Most of this grain is expected to come from Canada due to their large harvest and good quality grain. Australian durum will also re-enter the export market, with the premium Italian market being the target. 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.

Harvest has commenced in most areas in SA with good quality grain being the trend. Yields have typically been above expectations other than in some isolated regions where were too advanced to benefit from the late spring rains. The Victorian and NSW harvests are still up to two weeks away where above average yields are anticipated.