Canada Markets

Just two short weeks ago this column explored movements in the durum market. DTN's National Index in the U.S. had moved above $7/bu. for the first time since August 2013 in early June, with the index reported at $7.42/bu. on June 9.

Since then, the index has continued to climb, reported at $8.44/bu. for Monday's trade, a $1.85/bu. or 28.5% increase from the low of $6.59/bu. reached in early April. Note that this move came after the market traded over a narrow 29-cents trading range for a period of nine months, enough to put most market watchers to sleep.

While the Canadian market continues to lag its United States counterpart, Dow Jones reported Prairie durum prices to average $224/mt or $6.10/bu. for the week ended June 23, up 20% from the $186/mt or $5.06/bu. reported for the prior week.

The attached chart indicates that the durum index has broken a downward-sloping trendline (blue line) drawn from the monthly high reached in 2008, although trade over the final four sessions of this month will determine whether we see a bullish monthly close over the trendline resistance at $8.04/bu.

The 38.2% retracement of the move from the 2008 high to the June low is $10.57/bu., which remains as the next upward target should this market carry on higher.

The lower study indicates durum's relationship with the spring wheat index. The difference between the National Durum Index and the National Spring Wheat Index was reported at minus 55 cents (spring wheat above durum) as recent as the April monthly close), while the spread currently stands at plus $1.88/bu. (durum above spring wheat), the narrowest this spread has been since November of 2011.

Given that favorable crop ratings in the U.S. are currently weighing on other commodities, one could question just why we're seeing a move as indicated. North Dakota's crop report suggests that 97% of the durum is planted, ahead of the five-year average of 89%. Emergence was rated at 87%, ahead of the five-year average of 83% while the crop was rated as being 89% Good to Excellent. Last year at this time the crop was rated as being 77% Good to Excellent. Saskatchewan's latest crop report pegged the crop as being 84% Good to Excellent, which is just slightly below the 86% G/E reported at the same time last year.

Two acreage reports are due out in the next week. Statistics Canada releases their updated acreage estimates on Friday while the USDA will release their acreage and stocks report on Monday. Perhaps the answer will be found in one, or both, of those reports?

What do you feel will be the biggest surprise in Statistics Canada's report due Friday? You can share your thoughts on DTN's latest 360 Poll found on your DTN Home Page. We look forward to seeing what you think and thank you for your participation!

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

Follow Cliff Jamieson on Twitter @CliffJamieson

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