Durum prices are likely headed higher but it won’t be in a straight line, says an analyst.
“I view it as fits and starts,” said MarketsFarm analyst Bruce Burnett.
Prices will shoot up when some trades take place and then pause or even fall back slightly before the next surge.
However, he has little doubt that the general direction will be upward because markets are only starting to come to grips with the tight supplies.
MarketsFarm estimates there will be 4.5 million tonnes of demand for Canadian durum in 2021-22 but only 2.9 million tonnes of exports.
Traditional buyers are going to have to look to alternative suppliers or substitute spring wheat for durum in their pasta recipes.
“Unfortunately for a lot of durum users, they can’t switch (due to) labelling restrictions as well as the fact that spring wheat isn’t suitable for the products that they’re making,” Burnett said during a presentation he prepared for a recent Ag in Motion virtual conference.
The United States is another big supplier of durum to world markets, but it too had a crop wreck. Farmers harvested 1.01 million tonnes, a 46 percent drop from the previous year.
He thinks the U.S. has already exported too much durum and will need to increase imports by 300,000 tonnes compared to last year. That will mainly come from Canada, putting further pressure on Canadian supplies.
“The problem with the durum market is we have whittled down the number of participants to be a very small number now,” Burnett said in an interview following his AIM presentation.
There will be some supplies from markets such as Australia, Russia, Kazakhstan and India but only enough to fill one or two cargo ships here or there.
Russia’s crop was also hammered by drought. Pasta manufacturers in that country have been lobbying the government to increase the export tax on durum.
Demand around the world will be rationed as high prices curtail consumption, but durum is a staple food ingredient in many markets so there will be stiff competition for what limited supplies are available.
It remains to be seen which markets will prevail and which ones will go without.
“We don’t know. That’s the wonderful thing about it. This is literally a game of musical chairs,” said Burnett.
Markets will have to wait another eight months for new supplies with the exception of the Australian crop, which is harvested in November and December.
Australia exports maybe 400,000 tonnes of durum in a good year like this one, which will not tide over anxious buyers for very long.
Canadian farmers planted 5.5 million acres of durum last year. Burnett thinks that will climb to more than six million acres in 2022. However, he doesn’t think it will approach the record of 7.25 million acres set in 1998, despite the incredibly bullish prices.
That’s because there will be stiff competition from crops such as canola and pulses. Pulses may be a particularly attractive option for growers due to sky-high fertilizer prices.
Contact sean.pratt@producer.com
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Source: producer.com