Canada Markets

One of the speakers at the recent International Durum Forum in Minot, N.D. summed up the durum market by suggesting that as a trader, if the phone rings and the customer is calling you, the price is going up. If you are forced to call the customer for sales, expect the opposite. It seems obvious who is calling who these days.

The attached chart shows a longer-term perspective of durum prices as determined by the trends in DTN's National Durum Index. Since hitting a low of $3.29/bu. on June 9 2010 and rallying to a high of $14.83/bu. a year later on June 22 2011, prices have struggled to remain above support of the 61.8% retracement of the year-long rally at $7.70/bu. over the January 2012 to June 2013 period. Prices broke through this support level in June, and have since traded along the bottom of a trading channel formation, with recent sideways trade over the past two months at $6.83/bu.

Since October 1, this index has traded between a low of $6.76/bu. and $6.88/bu. Potential resistance could be seen at the higher end of the channel at $8.10/bu., while critical support is found at the bottom of the channel at $6.60/bu.

More than once the subject of the huge Canadian supply was brought up in the day-long meeting. Agriculture Canada's July forecast suggested production of 4.8 mmt and total supplies of 5.880 mmt, while most recent data which includes Statistics Canada's September estimates has pegged production at 5.579 mmt and total supplies at 6.760 mmt, 880,000 mt higher! One participant suggested this was "the anchor" which is dragging down the market.

Despite the sluggish market as indicated on the attached chart, Canadian producers are dealing with the further issue of logistical challenges which have affected the movement and pricing of most commodities, including durum. A quick look at accessible internet bids for Prairie durum suggests an average price of $5.44/bu, with prices ranging from a low of $4.90/bu to $5.91/bu ($180/mt to $217/mt).

The Western Producer's interview with Mark Hemmes of Quorum Corp suggests that vessel wait times on the West Coast are "as bad as they've ever been," with no end in sight to what is described as chaos. There's a long list of issues, which include the sheer size of the crop, the shift in export patterns to West Coast ports and the diversification of crops grown. Competition from competing sectors such as oil and potash are also noted.

The news is perhaps not all bad in the long run, however, with more than one speaker at the conference noting the tightening global stock situation and the fact that a production shortfall anywhere in 2014 will lead to a move higher in prices. It was noted that growers in France are losing interest in growing durum because of the discounts faced, while U.S. growers are losing interest due to the disappearance of durum's premium over spring wheat. From the processor's perspective, pasta demand has been flat for five years while fads such as gluten-free diets are further eroding demand. Still, they remain concerned that global production is barely meeting consumption and as one miller suggested, a $1.40 for a one-pound box of pasta is the cheapest meal a family can put on the table.

DTN 360 Poll

Just for fun, we asked you who is going to take home the Grey Cup in the Grey Cup. This ran both before and after the Eastern and Western Semi-Finals last weekend, so some responses may have favored a team already eliminated; 20% of the respondents didn't care who wins, while an over-whelming 76% of respondents chose the Saskatchewan Roughriders. Of course, in Saskatchewan, 94% of respondents favored their Riders. Thanks for your participation and have fun watching the game!

Cliff Jamieson can be reached at cliff.jamieson@telventdtn.com

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