Excited About Durum, HRS Leans Neutral/Lower

Rejeana Gvillo

Jun 15, 2020

Durum remains a bright spot for the Canadian balance sheet but spring wheat is not as appealing. This week, FBN wanted to share balance sheet outlooks for its readers, underscoring the risks around each market.

Durum stocks set to be tightest in years

Durum remains a bright spot from a pricing outlook. That is partially because global supplies of durum are tight, and that outlook is not expected to change for 2020/21. For the current crop year, Canada’s durum stocks are forecast to be at their tightest level in over 20 years. May weekly exports suggest that the final total for the month could be close to 550,000 tonnes and 4.3 million for the crop year through May.

FBN is assuming that crop year exports will total 5 million tonnes, which puts ending stocks near 700,000 tonnes, down about 1 million from last year.

Durum cash prices have mostly held steady for Canada in recent weeks. Demand overall remains solid. Durum prices can be pressured by Minneapolis futures, but durum prices also can break away from Minneapolis. While combined production (green bar) between the U.S. and Canada is forecast to increase this crop year, stocks are expected to decline further (red line), and FBN believes this will keep durum prices elevated relative to Minneapolis futures.

Non-durum spring wheat

This balance sheet is not as exciting as durum. For 2019/20, combined stocks between the U.S. and Canada are forecast to remain around 11 million tonnes, with that total likely to hold for 2020/21. Combined production is expected to be up marginally for the coming harvest season, keeping pressure on the board.

Furthermore, China remains a mostly uninterested party for HRS wheat—both from Canada and the U.S. Early condition ratings for the U.S. are well above average for key states, and planting season is wrapping up with no major issues for North America. We likely need a production problem to strengthen the market.

FBN's take on what this means for the farmer

The outlook for non-durum spring wheat is not too appealing from a producer standpoint. The good news is that the outlook has improved from a few months ago, but we need a production cut to move the market a lot higher. For durum, the cards are stacked in favor of the producer. Prices will likely move higher into the 2020/21 crop year.

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Rejeana Gvillo

Jun 15, 2020