Is 2020/21 Durum’s Year?
Wheat markets continue to inch higher this week following production concerns in Argentina and the EU. Corn and soybean markets are also rising due to challenging weather affecting the crops’ end season. More about the global harvest is starting to be understood, including here in Canada thanks to StatsCan’s first production estimate for the 2020 Harvest.
On that note, there’s a saying I’ve heard many times from some pretty savvy, experienced farmers that while you grow durum every year, you should really only sell it every third year. Is 2020/21 going to be this year? Arguably yes, albeit StatsCan’s recent first estimate of Harvest 2020 has created some headwinds for durum prices to stay elevated, if not climb above the values seen towards the end of 2019/20. More specifically, through the end of August, average durum prices of $7.30 CAD/bushel across Western Canada is below the $8 and $9 handles trading on the Combyne Marketplace the last few months, but they’re still 14% better than a year ago!
In their first production estimate on August 31st, StatsCan said that durum production in Canada would total 6.93 MMT, the second-largest crop of all time (record of 7.76 MMT set in the 2016/17 bumper year). With durum supply up nearly 40% year-over-year, it accounts for nearly 60% of the 3.39 MMT year-over-year increase of all Canadian wheat. Digging even further (and as the table below shows), Alberta durum production more than doubled, while Saskatchewan durum production is up by nearly a third, or a 1.22 MMT bump from Harvest 2019!
While you can also see in this table that spring wheat harvest improved marginally, Alberta’s bigger spring wheat production basically offset the 6% year-over-year drop in Saskatchewan. Ontario’s winter wheat crop also helped bring the total Canadian wheat output up, as Ontario farmers are expected to harvest 1 MMT more winter wheat this year!
Coming back to durum though, Agriculture Canada is expecting the robust international demand for the noodle-making wheat to continue from 2019/20 into 2020/21 as they raised expectations for both crop years to 5.3 MMT. To be clear, if realized, these 2 crop years will now set the record for largest durum export campaigns. That’s largely a function of robust demand, and some slightly smaller supplies out of Europe. For the former, Italy, Morocco, and Turkey (surprisingly) have been big customers in 2019/20, while 2020/21 durum yields in Europe are down about 6%, namely because of 19% drop for French durum.
Ultimately though, with the recent bigger production estimate from StatsCan, in my opinion, Canadian durum ending stocks for 2020/21 should end up closer to 1.4 – 1.5 MMT, not the 1.2 MMT that AAFC said a few weeks ago. However, if we continue to see open railroads in Canada, the additional durum production expected this year might fight a home with international buyers, but inherently, at a lower price than what I would’ve expected just a few weeks ago.
Regardless, I think we’re still in good shape to see average durum prices in the Canadian Prairies climb back towards $8 CAD by November. With that in mind, it’ll be important to remember another classic grain markets saying for durum markets this year: Make sales when you can, not when you have to.
CEO | FarmLead
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