The tightening 2007-08 global supply and demand outlook has pushed wheat and durum prices to all-time highs during the past few months. But unlike wheat prices, which had stabilized somewhat after hitting record levels in the last half of September, durum prices continued to soar to new heights, prompting some Italian consumers to stage a one-day "pasta strike" in protest.
Although durum’s record-setting rally began earlier this season, in the third week of September, U.S. cash durum prices in interior markets pushed past the psychologically key level of $10 a bushel ($367 per tonne) for the first time and remained there. The move occurred even though the U.S. harvest, which had wrapped up a few weeks earlier, brought in a 2.8-million-tonne crop, 43% higher than 2006-07 output.
Despite the big gain in U.S. production, global supplies are forecast to be especially tight in the coming year, according to the International Grains Council (IGC). That outlook is based on crop problems in Canada and the European Union (E.U.), as well as disappointing harvests in Turkey and Syria.
In late August, the IGC projected world durum production in 2007 at 33.7 million tonnes, down about 1% from an estimated 34.1 million in 2006 and down 9% from 37.2 million in 2005. The production outlook in both the E.U. and Canada continued to deteriorate in the past several months because of unfavorable weather, resulting in forecast 2007 crop declines of 9% and 10%, respectively, from 2006 levels.
The Council forecast 2007 E.U. durum production at 7.8 million tonnes, down 600,000 from an earlier estimate and the lowest since 2001. The drop is based primarily on an extended period of wet weather during the harvest in France and poor growing conditions in Italy.
In Canada, crop prospects worsened following several weeks of hot, dry weather as harvest began, the Council said, leading to reduced yield expectations. The IGC cut the Canadian forecast to 3.6 million tonnes, down 800,000 tonnes from earlier projections, but still above the especially poor 2006 crop of 3.3 million.
Based on the crop problems, the world durum supply and demand balance in 2007-08 has tightened considerably, despite the boost in U.S. output, the IGC noted. The Council said it expected combined supplies in the U.S., the E.U. and Canada to contract by around 10%, to 19.3 million tonnes, from the previous season.
And carryover stocks are forecast to fall to historically low levels, with the world ending stocks forecast at a mere 1.9 million tonnes. Canada alone will see total supply down 28% from last year on a sharp cut in carry-in stocks, and July 2008 carryover is forecast at just 700,000 tonnes, a modern-day low, the Council said.
These three exporters typically account for around four-fifths of world durum trade, the Council said, and their supply problems led the Council to trim its world trade forecast, which stands at a nineyear low of 6.3 million tonnes. That’s down 700,000 tonnes from the IGC’s earlier 2007-08 projection and down nearly 1 million from the 2006-07 trade estimate of 7.25 million.
The most notable changes from earlier import projections should occur in North Africa, the IGC said. Morocco had a poor domestic harvest, and its imports had been expected to increase to 1 million tonnes versus 740,000 in 2006-07, the Council said.
But higher durum prices and limited export availabilities are likely to force Morocco to shift demand to other wheats, and the latest IGC 2007-08 durum import forecast is now at 900,000 tonnes. Good harvests in Algeria and Tunisia will reduce import needs in those countries, by 400,000 and 70,000 tonnes, respectively, the Council said.