Strong durum market starting to show signs of faltering

Commodity News Service Canada — It’s a well known sentiment in the grain markets that ‘the best cure for high prices is high prices,’ and that is starting to show signs of proving true in the Western Canadian durum market.

Durum bids in the $10 to $11 per bushel range can currently be found in Saskatchewan, according to Prairie Ag Hotwire data. Prices are even stronger across the border, with U.S. elevators in Montana and North Dakota offering prices that work out to as much as $19 per bushel in some cases.

A smaller North American crop, especially of higher-quality durum, together with production issues in Europe, have driven prices higher over recent months.

“We obviously had some quality issues, so we’ve seen prices increase quite a bit,” said marketing specialist Erica Olson, of the North Dakota Wheat Commission. However, she pointed out that the high-end prices being quoted were for the “very top grades,” with discounts for quality.

The top-end bids are also starting to widen out from elevator to elevator in Western Canada.

“The companies that have sufficient coverage are lowering their bids, because it’s very hard to sell durum at these prices,” said Jerry Klassen, manager of Swiss-based GAP SA Grains and Products in Winnipeg.

With No. 3 durum bringing in a higher price to the producer than canola, the strong prices are generating movement in the country, said Klassen.

He added that while commercial stocks were still not that large, there is also a fair amount of uncertainty over the logistics of rail movement over the winter which is making buyers cautious. The Port of Thunder Bay, where the bulk of Canada’s durum destined for Europe is exported from, will close for the season in late December. When it reopens in the spring, the higher-quality Mexican crop will be starting to come off, said Klassen adding that North African buyers were already starting to book some Mexican product.

Klassen expected U.S. prices would remain firm compared to the Canadian market, due primarily to the logistics problems and railway legislation that is limiting rail movement of Canadian durum across the border. He said that could change if the legislation is not extended at the end of November, but noted that the better rail movement would cause U.S. prices to decline as well.

“I think farmers may want to be selling their durum here, they don’t want to hold on for too long,” said Klassen.

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