Durum Market Snapshot:
Since our last Durum wheat market update, durum markets have shown significant volatility touch yearly lows of A$263/mt in late April on the ICE exchange before rebounding to touch yearly highs of A$335/mt in early August before easing in more recent trade. The easing in prices comes amid weaker than expected global demand and despite the expected tightening of global durum stocks.
Globally, we undeniably continue to battle a significantly burdensome wheat balance sheet. In the USDA’s September report global wheat production was revised up 1.67 million mt with the global wheat to stocks ratio sitting at a comfortable 35.68%, the global glut of grain sees international grain prices remain under significant pressure.
Globally durum stocks also remain inflated which has weighed on values of late despite forecasts for a significant cut in production in 2017/18 with Canadian and US durum production expected to fall by over 50% year-on-year. In Canada, durum stocks as of July 31 were estimated at 1.863 mmt, in line with analyst expectations, but up 69.4% year-on-year and above both the five-year and 10-year averages for the same date. Canada’s growing stocks were noted despite soaring domestic feed demand, with domestic use calculated at 2.28 mmt, which is roughly three times the five-year average. The 2016/17 stocks-to-use is estimated at 26.6%, up from 20.9% the previous year and the highest in three years. Furthermore, EU durum production is now forecast to fall 5% year-on-year with Italian production forecast to fall over 15%. In all, major exporter’s production is forecast to fall by over a third; even so we are yet to see a price correction with harvest pressure and a lack of global demand seeing prices drift lower. At current prices Canadian and US growers remain reluctant sellers and it is going to take some price response for growers to re-engage.
Domestically, since our last update we have seen durum prices trade largely sideways. However, we continue to see the premium between feed grade wheat and durum narrow as the forecast for the 2017/18 grain production continues to walk backwards in Southern QLD and Northern NSW amid ongoing dry conditions. Due to durum’s small and selective markets domestic durum prices have largely shrugged recent market strength with limited old crop stocks available limiting price discovery in the domestic market.
Despite the recent rally prices are still statistically low, with ICE Durum prices in the bottom 33rd percentile of prices over the last five years, and the risk/reward matrix remains skewed to the upside. However, any rally may have to wait until harvest comes to an end in Canada and end-user/export demand sufficiently returns to see any sustained rally.
Next Payment: December 2017
Finalisation: December 2017
FOB Changes: Various (depending on grade and port zone. Statements of estimated equity will be amended in due course).
ASX Wheat Jan’18 Price (Jun’17-Sep’17)
CME Wheat Price (Jun’17 – Sep’17)
ICE Durum Price (Jun’17-Sep’17)
Data published on 21 September 2017.
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Disclaimer: This is not financial or market advice or a risk management or strategy recommendation and growers should consider seeking independent advice to assess the appropriateness or otherwise of this marketing program for their personal circumstances. The information is not exhaustive and should be read in conjunction with the Special One Grain Standard Pool Management Terms and Conditions and Pool Information Sheets.