Tighter supplies of higher-quality durum boosting bids

CNS Canada — Tight European supplies of high-quality durum are boosting North American prices for the grain — but there are also quality issues with the Canadian and U.S. crops limiting how much durum will actually be sold at those stronger prices.

“There is a very large durum program to northern Europe this year,” said Jerry Klassen, manager for GAP SA Grains and Products in Winnipeg. Quality issues in Europe were contributing to the demand, he said, but added “we have a lower-quality crop ourselves, which will temper the export business.”

Quality issues with Europe’s barley crop has caused buyers there to turn to North America, but Canada and the U.S. had their own adverse weather and quality issues this year, CWB’s director of market research Neil Townsend said.

Canada’s 2014-15 durum crop is forecast at 4.7 million tonnes by Statistics Canada, which compares with the 6.5 million tonnes grown the previous year.

Townsend estimated just over 30 per cent of Canada’s durum crop will hit the No. 1 and 2 quality grades, which compares with a normal year which would see about 55 per cent hit the top grades.

“There won’t be enough to satisfy the buyers who think they need to have No. 1, or No. 2 durum,” said Townsend. While “the tentacles of the pasta-producing market are out there looking for high-quality durum,” he expected some demand would eventually be filled with lower-quality supplies.

“Reconnaissance”

Durum bids as high as $9.55 per bushel 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 C$13-$15 per bushel.

Canadian prices have occasionally reached those higher levels as well, with some U.S. buyers reportedly buying old-crop Canadian durum in southern Saskatchewan for as much as C$13 per bushel.

Buyers are not thrilled to be paying up to secure supplies, and some of the recent strength in the market is tied to “reconnaissance bids” where grain companies put out a price to see what’s available, said Townsend. Many of the higher durum prices being floated out there will not necessarily result in much actual business, but may also be tied to buyers who are scrambling to fill a previous commitment.

In time the quality premiums will likely erode, with some end-users turning to cheaper, lower-quality product, said Townsend.

Increases in desert durum production in the U.S. and Mexico are also expected, with those supplies starting to be available in the spring of 2015.

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

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