NCI Market Update Webinar Series: Special Edition | Featuring Jim Peterson
Jim Peterson, Policy and Marketing Director for the North Dakota Wheat Commission.
Northern Crops Institute (NCI) held a Market Update: Special Edition on February 2nd, 2022. This hour-long special edition featured Jim Peterson, Policy and Marketing Director for the North Dakota Wheat Commission, who gave a presentation on the global durum situation. Jim went into depth on the 2021 durum situation as well as the global outlook for 2022.
The United States Situation
The durum situation in the U.S. has been volatile over the past year. The 2021 market showed that durum production was down 46% from 2020 due to a major drought in Montana and North Dakota. This crop was the smallest crop since 1961. Even though the drought brought in small yields, the crop quality was still good. Demand rationing was also quite significant with lower domestic demand and even lower exports. The ending stocks were projected to fall to historic lows. Although, the on-farm producer stocks as of December 1st were lower than the harsh conditions from 2008.
Industry specialists are predicting an increase in acres, but the level of grain will be tempered by competing crops. Any significant price changes could quickly shift what producers decide to plant, as planting might not be on the top of producers’ minds. The substantial increase in input costs including fertilizer, herbicides, fuel, and equipment costs, will favor some crops over others. With all of these factors in play, private surveys have indicated that a 6 ½% decline from 2021 is the reality for this durum season.
Canada’s Situation
Canada’s durum situation has faced many different challenges over the past year. The strong crop competition at planting reduced the durum planting area by 4%. The limited soil moisture and major heat and dryness in the late-season produced significantly lower yields. Canada’s durum production of 99 million bushels was the smallest crop since 1988. This crop is 60% below the 2020 crop. Canada’s ending inventories are projected to fall as low as 16.4 million bushels, and that aligns with their historic low in 1985.
Based on the 2021 crop, we can expect that Canada will face many of the same challenges in 2022. Canada faces strong crop competition for acres just like in the previous year. Barley, oats, pulse crops, flax, and canola will all pull at acres. According to Agriculture and Agri-Food Canada, durum acres are supposed to increase by 9%. This would help production rebound to 200 million bushels if the average yields are attained. The harsh reality is that the durum growing areas are still very dry. Even if the average yields are attained, it might still be a few years until Canada is able to rebound from this situation.
Global Situation
The European Union prices are starting to narrow close to the United States and Canadian values as their domestic stocks decline, along with the declining exports from other countries. The early forecasts for 2022 is only for a small marginal increase from a year ago. Even though last year Morocco had a bigger crop than expected, the North African region remains quite dry. The production losses from this region could quickly excite the world export market soon. World inventories are still on the low end and will take more than one year to rebuild.
Jim highlighted the most important of this presentation and summarized the main takeaways from the webinar:
“My presentation was intended to give a comprehensive look at the current fundamentals impacting the U.S. durum marketplace, and some early perspective on what factors will drive 2022 durum acres. A significant drought in the U.S. and Canada in 2021 has led to historically tight supplies in both countries, and sharply higher prices worldwide, which has dramatically lowered demand. Prices have softened in the early 2022 calendar year, but remain well above historical averages. In the upcoming planting season, high prices are expected to drive increases in planted areas in both the U.S. and Canada, but equally strong prices for many other crop options will temper the level of gain. The durum market has always been challenged by the lack of a futures market, a limited number of buyers and sellers, and a more confined production area, relative to other wheat classes. This makes it more susceptible to significant shifts in prices between growing seasons, and tends to make marketing decisions for producers, and purchasing decisions for buyers more challenging.”
These Market Updates were created to engage with past and present course participants and to offer market insight to those professionals. By providing this pertinent information on various topics, NCI has fostered growth and learning all around the world. NCI greatly appreciates contributions from speakers like Jim Peterson during these Market Update webinars.
For more information about the future webinars, click here.
Click below to watch yesterday’s presentation.