NCI Market Update Webinar Series: Special Edition | Featuring Jim Peterson

Jim Peterson, Policy and Marketing Director for the North Dakota Wheat Commission.

The Northern Crops Institute (NCI) recently hosted a Market Update: Special Edition on August 3, 2022. This hour-long special edition featured Jim Peterson, Policy and Marketing Director for the North Dakota Wheat Commission, who presented on the global durum situation. Jim went into depth on the 2022 durum situation so far as well as how it compares to last year’s durum situation. He also presented on events around the world which are significantly impacting markets this year.  

Price bids for ND wheat between 2007 and 2021.

Peterson began by first providing a recap of what the durum situation was like in 2021. During this season, durum production was at its lowest point in 25 years, and was largely caused by the severe drought that ND and other durum-producing states and Canada experienced. This drought and resulting low production of durum cascaded into other effects. These included a sharp escalation in prices for durum to the second-highest level on record and the lowest consumption of durum in almost 20 years, and a decline in world durum trade by more than 30%.  

After sufficiently reviewing the durum situation from 2021, Peterson pivoted back to present-day durum conditions. He stated that a turnaround in weather for North Africa and the E.U. is beginning to reverse their lower durum production numbers, and the U.S. and Canada is seeing a similar rebound in terms of durum production. This has led to a sharp decline in prices, and is forecasted to lead to higher world trade as demand improves for pasta and other durum products. However, he also pointed out that world inventories remain low, and are projected to fall to 30-year lows by spring of next year, hindering the growth of the market.  

Global durum production numbers, 2010-2022.

Peterson also stated that, while global production of durum is up 8%, this is lower than early spring projections estimated it would be. However, despite this, Peterson did have good news to share: Canadian and U.S. crops look promising, due to the adequate growing season moisture that arrived earlier in the growing season. However, they’re still at risk for quality simply because of the lateness of the crop.  

For the U.S. durum situation specifically, a 21% higher planted area and average to above-average yield prospects are both strong indicators of a 77-million-bushel production total this year. This is more than double that of last year. Desert durum (produced in Southern California and Arizona) production was considered “excellent,” and Northern durum (produced in Northern Montana and North Dakota) appears to be following a similar path thus far, though Peterson noted that the crop is 2-4 weeks late in development due to the late-season historic snowstorms in April and heavy rains in May.  

Crop condition indexes, 2021-2022 (and 5-year average).

This late development has been partially corrected by the recent heat in the Northern durum region, which has helped the crop accelerate in development. Yield prospects in North Dakota were said to be the highest, especially due to the cool period in July. However, the Montana crop appears to be maturing at a faster rate than North Dakota crop, hence why harvesting has begun in some parts of Montana.    

Moving onward to the Desert durum region, Peterson stated that the production area was up an astounding 72% compared to 2021, and that strong market prices in late 2021 and early 2022 were likely the reason for this. Despite significant water restrictions in some areas, favorable growing conditions helped the crop yield increase much more over 2021, with the harvest being completed in June. This harvest produced good quality crops overall, though Peterson shared that protein levels in the durum were slightly lower than in prior harvests.  

Demand for durum in the U.S. is steadily growing, and is showing strong signs of recovery following the supply chain issues that hampered production during the winter and spring. Margins for pasta plants and mills are improving, driven by a decline in durum values and steady retail prices. More than one-half of reported durum sales so far were for Italy, with other export sales performing quite well, additionally.  

Drought conditions map of Canada, June 2022.

Canadian durum is on a similar trend as U.S. durum, according to what Peterson explained. The planted area of durum in Canada is also up compared to 2021, albeit only by 9%. This was largely due to strong price competition from other cereal crops. Overly dry soils in Alberta and Southwest Saskatchewan limited the region’s crop potential, though rains in June and July helped to mitigate this. Late planting early in the season has resulted in a similar late crop to the Northern durum region, but still expects that harvesting there will begin earlier than in North Dakota.  

Finally, to conclude his presentation, Peterson outlined some general factors that are forecasted to impact commodity markets as a whole. Rail transportation was a major one (delays and poor service during a slack period of demand) along with the direction of the corn market (high corn prices serving as a backstop to wheat values), a possible recession looming ahead, and the fact that Northern durum producers are in a key position to begin store portions of their crops (assuming prices continue to decline). These are all things to watch out for as in the coming months, especially as the harvest season has nearly arrived.  

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.