Rising durum acres offset by declining spring wheat

Durum wheat. (Gipsa.usda.gov)

CNS Canada –– Increased durum acres in Canada may limit the upside potential as far as prices are concerned, but smaller spring wheat plantings will also limit the downside, according to a durum trader.

Statistics Canada on Thursday pegged intended durum acres at 6.12 million acres, which would be up from 5.82 million in 2015. Meanwhile, spring wheat area in the country is expected to fall by a million acres, to 16.04 million.

If realized, durum acres would be their largest since 2002 and spring wheat area would be the smallest in nearly a decade.

“Durum by itself is not bullish, but the spring wheat complex is a bit friendly longer-term, which will be supportive for durum,” said Jerry Klassen, manager of the Canadian office of Swiss-based GAP SA Grains and Products in Winnipeg.

With average yields, he said, the trade was factoring in a Canadian durum crop in 2016-17 of six million to 6.2 million tonnes, which would be about 800,000 tonnes ahead of 2015-16.

With an average export program, that production increase would see the carryout rise to well above the 10-year average.

Klassen said the upcoming European Union durum crop is also expected to be up by 600,000 to 700,000 tonnes on the year, and will be marketed fairly aggressively. U.S. farmers are increasing their durum acreage this year as well, according to U.S. Department of Agriculture data.

While the potential for ample supplies of high-quality durum is bearish, Klassen added support will still come from spring wheat underneath the market.

Durum is currently trading at about a 60-cent premium to hard red spring wheat in Western Canada. “I don’t think durum will trade at a discount to spring wheat,” said Klassen, but with spring wheat acres forecast to be down on the year, “you’ll see the durum spread over spring wheat narrow.”

Dryness concerns in key durum growing regions of Saskatchewan will be followed closely, but Klassen noted the larger acreage should help alleviate those concerns to some extent.

Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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