I once had the opportunity to take in a presentation by a United States durum trader, who explained how the market worked. He suggested that if he were calling the buyer or customer, the price was going lower. If the customer was calling him, then the opposite could be expected and price was on its way up. The last few week's data could have buyers searching for their Rolodex.
Going into today's USDA Quarterly stocks and Acreage reports, the latest estimate had pegged the 2016/17 U.S. crop year carryout at 50 million bushels durum or close to 1.4 million metric tons, which represented 45% of the estimated use for 2016/17 and was a huge source of security for buyers. Friday's June 1 stocks, which marks the ending stocks for 2016/17 and the beginning stocks for 2017/18 were reported at 36.3 mb, which is 30.6% higher than estimated for the same date in 2016, but 13.7 mb or 27% lower than seen in previous government supply and demand tables.
The attached chart shows durum ending stocks increasing in each of the past three years (brown bars), while is the highest reported in 11 years. The stocks/use ratio is calculated at 28.9% by leaving 2016/17 total supplies unchanged and revising upward usage, which is also the highest in 11 years. One interesting point is seen in total demand (blue bars), with the higher-than-expected use pointing to implied demand of 125.7 mb, which is the highest level of disappearance seen in six years and the second consecutive annual increase.
Friday's crop report also pointed to a lower revision in U.S. seeded acres, which were estimated at 1.919 million acres, down 20.4% from 2016 and would be a three-year low. The current projection is for harvested acres to reach 96.8% of seeded acres, which is close to 98.1% in 2016/17 and could prove high, given the current effects of the drought in the U.S. Northern Plains and Twitter pictures showing spring crops being baled for feed or grazed.
Earlier in the week, North Dakota's durum crop condition was rated 24% Good to Excellent, 23% Poor to Very Poor. Montana's crop was rated 19% Good to Excellent, 24% Poor to Very Poor. Forecast heat in the next week will add further stress to these crops.
There are indications of $9.00 to $9.50/bushel USD mill bids today, but chances are the bins are locked and the keys thrown away.
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Cliff Jamieson can be reached at email@example.com
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