Grain market review: Durum

by Teresa Acklin
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   The tightest durum supply conditions since 1974-75 have pushed prices to near 20-year highs, and the 1994-95 outlook promises only marginal relief from low stocks.

   Ending stocks in Canada, the European Union and the United States for the 1993-94 crop year (July/June) should total 3.1 million tonnes, according to the International Wheat Council. That's the smallest amount since 1974-75, when durum carryover for the three totaled 2.5 million tonnes.

   Canada, the E.U. and the U.S. together account for about 50% of world durum production. More significantly, the group typically supplies about 98% of the world's imports each year.

   Canada's 1993-94 ending stocks are expected to stand at 1.3 million tonnes, the lowest figure in five years, while the E.U. should carry 1.2 million, the smallest level since 1983-84. Of the three major durum exporters, the U.S. potentially faces the tightest situation.

   March forecasts by the I.W.C. and the U.S. Department of Agriculture put 1993-94 U.S. durum ending stocks at 600,000 and 572,000 tonnes, respectively, down more than 50% from the previous season and the lowest level in more than 30 years. And the U.S.D.A.'s March 31 grain stocks report, reflecting physical supplies as of March 1, implies that U.S. durum stocks could fall to perilously low levels before the U.S. harvest gets under way in mid-to-late August.

   U.S.D.A. put U.S. durum stocks on March 1 at 1.14 million tonnes, the lowest level for that time of year since at least 1967. Using the 1993 average U.S. durum grind of 157,300 tonnes a month, U.S. mills in the five to six months between March 1 and harvest could consume as much as 860,000 tonnes, leaving fewer than 300,000 on hand as harvest begins.

   Tight world supplies have driven prices sharply higher. U.S. and Canadian durum export prices between May 1993 and March 1994 soared by 70% to 80%.

   In March, the average U.S. export price was U.S.$240 a tonne, the highest monthly average since December 1974's $252, according to I.W.C. statistics. Canadian export prices in March were nearly $300.

   Prices are expected to remain strong as the 1994-95 season begins, and subsequent price behavior will hinge on production prospects.

   Increased durum area is expected, given high prices as Northern Hemisphere planting begins. The I.W.C. estimates Canadian plantings will increase by about 25%, resulting in 1994-95 production of 3.8 million tonnes versus 3.4 million in 1993-94.

   But price incentives in the E.U. will be mitigated by current set-aside provisions and subsidy eligibility issues, the I.W.C. said. Thus, plantings for the E.U. as a whole may increase by only about 1%, with 10-year average yields producing an 8.0- million-tonne crop, compared with 7.3 million in 1993-94.

   In the U.S., the U.S.D.A.'s March planting intentions report indicated producers planned an 18% increase from the previous year. Applying five-year average area abandonment and yield figures to the intentions figure results in a crop of about 2.3 million tonnes. But U.S. durum competes with spring wheat, also high-priced this season, in planting decisions, and a late shift in relative prices could alter actual planting levels either way.

   The I.W.C. estimates total 1994-95 world durum production at 27.7 million tonnes, up 8% from 1993-94 production. Despite this increase, low carryover stocks will restrict export availabilities, the I.W.C. said. And 1995 ending stocks will see only a marginal recovery.

   World trade in 1994-95 is put at 4.3 million tonnes, down from 4.4 million in 1993-94. Demand from North African countries, with the notable exception of Algeria, could ease, and E.U. imports should decline if production meets expectations. Demand from Russia is expected to remain minimal, the I.W.C. said.

   Canada should supply up to 75% of world imports if its production increases as expected, the I.W.C. said. But U.S. exports should fall to fewer than 1 million tonnes amid tight supplies.