(Commodity News Service Canada) –– The recent unrest in North Africa and the Middle East, including political upheaval in Tunisia and mass protests in Egypt, is partially due to surging food costs. The unrest has led to talk of increased demand for grains from the region, as governments work to augment their reserves.
North Africa is a major destination for Canada’s durum exports, and while durum prices are rising, it remains to be seen if the export program will increase significantly due to Canada’s own tighter supply situation.
Daily durum prices quoted by the Canadian Wheat Board (CWB) have increased by about $50 per tonne over the past month, with the actual values dependent on quality.
“When it comes to food security, people get concerned,” said Bruce Burnett, director of weather and market analysis with the CWB.
The situation in North Africa was being monitored closely, he said, but added that the concerns were more widespread, with tight stocks of many commodities, including durum, causing prices to increase around the world.
“The durum market is becoming very tight, especially for the higher-quality supplies,” he said.
The CWB currently forecasts total durum exports during the 2010-11 marketing year of over four million tonnes, which would compare with the roughly 3.8 million Canada exported in 2009-10.
Of that total, sales to North African countries accounted for about 1.1 million tonnes of the total exports in 2009-10, according to Canadian Grain Commission data.
Algeria was recently in the market making fresh durum purchases, according to trade sources. Tunisia was also said to be tendering for durum over the past week, but the country is now believed to be covered until July 1.
“It’s unfortunate that the price is rallying due to the adverse civil situation in these countries, but there’s no doubt it’s price-friendly for the durum market,” said Jerry Klassen, manager of GAP Grains in Winnipeg.
“I think the durum market is in for multi-year highs because we’ll have extremely tight stocks at the end of the crop year from all major exporters,” he added.
“If we have a crop problem in any of the major exporters for durum, we could see significant further upside,” said Klassen. Demand would start to be rationed, he added, but also pointed out that price often becomes less of an issue when there is political unrest and countries look to increase their reserves.
An increase in Canadian durum acres is likely this spring, Klassen said, but the extent of that increase remains to be seen, as canola acres are also likely to be up in the main durum-growing regions of Western Canada.