Looming durum harvest weighing on market

As of Aug. 11, the northern durum harvest in the U.S. was just getting started, but its anticipation was weighing heavy on the market and putting pressure on local cash durum prices.

Cash bids for durum were a bit lower than earlier in the month and were hovering around $6.25 and not much over or under, according to Erica Olson, market development and research manager for the North Dakota Wheat Commission.

“Quite frankly, it just goes back to the same main things. We have harvest pressure coming up, and then just world supply and demand dynamics that appear to be more comfortable than we’ve had in a couple of years. So, prices aren’t great, but they still are $1 to $1.25 premium over spring wheat. I would say there is a lot of anticipation about harvest,” she said.

Olson noted there was just a little bit of harvest completed in Montana, but not much in North Dakota. The last crop progress report from USDA showed 14 percent harvested in Montana and 3 percent in North Dakota.

“Producers are waiting for things to dry out. It’s been very humid. A lot of areas have been receiving precipitation, so that has completely delayed harvest,” she said. “Hopefully, we see this pattern change soon because I do think there is some nervousness out there about any potential impacts on quality of the crop if this continues.”

As has been the case throughout the whole season, the North Dakota crop remains in pretty good shape, although producers have seen the crop condition ratings decline over the last few weeks as harvest approaches. That said, about 69 percent of the crop is still rated in good/excellent condition.

“I think that’s reflective of some areas that had dry conditions,” she said. “But we have had some crop damage, too, and that has kind of continued from rain, hail, and strong winds.”

The crop in Montana definitely has less potential, Olson noted, as nearly half of their crop is rated in poor/very poor condition due to lack of rainfall during much of the growing season.

“We’re not expecting good yields there,” she said.

The Canadian crop is facing a somewhat similar situation as they inch toward harvest. A lot of their durum growing areas were dry during the growing season but also have been getting some rain in recent weeks. There is no harvest activity there yet. And, in fact, Canada’s most recent estimates are showing lower yield potential for this year and about a 6 percent decline in production.

“They’re also forecasting their exports to decline about 15 percent, and that’s primarily due to Europe and North Africa having better crops this year, so the import demand will be lower,” she said.

The U.S., she added, is looking at crop potential similar to last year at about 80 million bushels (MB). USDA has forecast U.S. durum exports to be slightly higher at 25 MB. Last year, the estimate was 19 MB.

“But, of course, for both of those countries, the big unknown is what we will actually see for yields and then, of course, quality. If we get any major surprises in either of those regions, I think that could potentially swing the pendulum for prices,” she said.

Looking at demand for U.S. durum, export sales are currently at 6 MB, which is up 16 percent on the year. “So, that’s positive,” she said, adding that in the last sales report there was a sale of about a half million bushels to Mexico.

“In fact, currently Mexico is our largest durum buyer so far this year at just under 2 million bushels,” Olson said. “What’s surprising about that is that Mexico used to be a large net exporter, but drought and other issues put this year’s production at about 30 percent of what it was just two years ago, so that’s a pretty substantial flip.”

There have also been some recent sales to Italy, Haiti, and Venezuela.

But domestically, in terms of demand, there’s not been much change as a lot of pasta manufacturers have good coverage through the end of the year.

“And with prices declining, obviously there’s no rush to buy until they have a better idea of what the crop looks like,” she said. “The big anticipation is about production potential for the producers here in the northern areas as they start getting into harvest.”