This month's Agriculture and Agri-Food Canada supply and demand estimates included a small upward revision to Canada's durum export forecast of 50,000 metric tons to 5.650 million metric tons for 2020-21. This appears to be record shipments, while ending stocks are forecast to fall to 810,000 mt, still slightly higher than the 737,000 mt carried out of 2019-20. Statistics Canada's March 31 grain stocks estimates, due for release on May 7, will provide better insight.
AAFC reported that global ending stocks of durum will fall to 8 mmt in 2020-21, or one of the lowest on record. Despite this, global prices are reported to have moderated with a focus on Mexico's crop and new-crop developments. According to pdqinfo cash data, the southwest Saskatchewan bid is down $7.55/mt from its March high of $316.33/mt while the southeast Saskatchewan bid is down $2.56/mt from its February high of $312.59/mt.
So how will prairie producers respond in terms of acres seeded in 2021? While official Statistics Canada March planting intentions are set for release on April 27, AAFC's unofficial forecasts point to a 5.6% increase in durum acres to six million acres, or the largest area seeded in three years.
One thing to note is, when looking at Statistics Canada tables, we see that if realized, this would be the first time that durum acres have increased for two consecutive years since 2016; during the past five years, seeded acres have alternated from an increase one year followed by a decrease the next.
The attached chart looks at the spread between the average durum price and price of wheat (excluding durum) for each of the past 15 crop years. These are shown by the blue bars. During these 15 crop years, durum commanded a premium to wheat on average, according to AAFC data, in all but three years. On average during this period, this premium is calculated at $35.73/mt, while ranges from a discount of $18/mt in 2010-11 to a premium of $141/mt in 2007-08.
The yellow bars represent AAFC's forecast price spread for both 2020-21 and 2021-22. This is forecast at $40/mt for the current crop year, while currently forecast to fall to $25/mt for 2021-22.
While this premium if forecast to shrink, producers may be even more concerned when current new-crop bids are considered. The green bars show the durum-spring wheat spread reported by pdqinfo.ca as of April 21 for western Manitoba ($10.40/mt), southeast Saskatchewan ($14.35/mt), southwest Saskatchewan ($3.92/mt) and southern Alberta (minus $3.33/mt), with the calculated spread in brackets. Across these four regions of the prairies, this spread averages $6.34/mt (durum over spring wheat), far weaker than the government's $25/mt forecast for the crop year.
As seen in Statistics Canada data during the past 10 years (2010-11 to 2019-20), in the three crop years where durum acres increased from the previous year while spring wheat acres fell, which is the scenario currently seen in AAFC forecasts, the average price spread is calculated to show durum prices averaging $53.33/mt higher than wheat. This range is from $40/mt to $65/mt. This is also the situation for 2020-21 or the current crop year, where this spread or durum's premium to wheat is forecast at $40/mt.
There are many other factors that are taken into account, such as rotations and soil moisture, but with tight stocks seen both globally and here in Canada, markets may be failing to send the price signals needed to get acres seeded and could lead to a surprise in the months ahead.
Cliff Jamieson can be reached at firstname.lastname@example.org
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