Durum Regaining Premium to Spring Wheat


WINNIPEG, Manitoba (Dow Jones) — The Canadian durum market is at a healthy stage after a tough winter and prices are starting to show some impact relative to spring wheat, according to industry participants.

“We saw a lot of pressure on the durum market itself (this winter),” said Bruce Burnett, weather and crop specialist at the Canadian Wheat Board (CWB). “Mostly because of the fact we had those transportation issues and when you couple that with the fact that a lot of durum markets are off the east coast so the eastern transportation system is frozen up. So basically, we saw the premium that durum usually has to spring wheat disappear.”

Now that the east coast transportation system has opened and is moving again, exports are improving and the demand is increasing. As a result the spread between durum and spring wheat has widened and helped to support the durum prices, he says.

“I think there's some fundamental reasons too why the durum market has been a bit stronger here,” Mr. Burnett said. “The durum stocks are very healthy, but they're not out of the realm of what they historically have been. Whereas with spring wheat, it's been at the upper end of what we've had. The durum situation is looking reasonably friendly, the market is still a little bit concerned with how we've planted some of this durum crop and what kind of quality we're going to get out of it. I think all of those things put together resulted in prices being put back in more traditional spread to spring wheat.”

“The carryout for the year will be in a comfortable situation for the farmer,” said Jerry Klassen, manager of the GAP SA Grains and Produits Winnipeg location. Mr. Klassen said this has resulted in farmers not being overly aggressive when it comes to making new crop sales or maintaining old ones either.

“What we're seeing is some international export demand stepping forward here and we're starting to see resumption of exports to the U.S. and some business to the U.S., which has helped increase our prices as well,” Mr. Klassen said.

“I think the focus now is turning to yields,” Mr. Klassen said. “And I think also there's a lot of uncertainty about logistics in the next crop year, or how things will develop. So I think there's a fair amount of uncertainty with the logistics with the upcoming yields, has also given the market some strength because what happens is the market incorporates a risk premium due to this uncertainty.”

Mr. Klassen added that the uncertainty on the logistics of upcoming crop yields incorporates a risk premium which strengthens the market.

Durum bids currently can be found in the 5.00 to 7.25 Canadian dollars a bushel in Saskatchewan, according to Prairie Ag Hotwire data.


Source:  Dow Jones

Posted by Haylie Shipp



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