Miller Magazine Issue: 118 October 2019

61 COVER STORY MILLER / OCTOBER 2019 LAST TWELVE MONTHS’ MARKET BACKGROUND The durum wheat prices trend reversal has been a fact since the beginning of 2019. While quotations steadily de- creased during the whole 2017/2018 Marketing Year (MY) and most of the first half of 2018/2019 (MY, Jul-Jun) under the pressure of large world supply, since November 2018 market fundamentals have started defining a new scenario. As a matter of fact, historical low prices and little or even negative profitability against other crops - particularly soft wheat – have pushed farmers to plant less durum in all major production areas, either export and import countries. Looking at the 2019 crop planting timeline, EU came first (Oct-Nov 2018) reporting durum area at -6% comparing with previous year, with basically all major produc- ing countries planting less durum, particularly France. During the first quarter of 2019, the very first fore- casts and the sentiment of major mar- ket players assumed potential strong acreage decrease in USA and Cana- da as well, later confirmed by official planting intentions reports issued by USDA in March (-31%) and Statistics Canada in April (-21%). Quotations in Italy and, in general in EU, found sup- port in the above confirmations and increased steadily through the whole quarter. After the first stage of prices increase, the market entered in a short “wait and see” period but soon planting delays in North America in May, early production estimate in EU in June suggesting a total output down from 2018 by a range of 0.7 - 0.8 Mio tons (-8% to -9%) and unfavorable crop conditions in Turkey pushed the Mediterranean importers back to the market to take the opportunity of abundant and available good quality stocks (CWAD1), add coverage and mitigate the risk of further price increase. Particularly, the Italian importers turned up again on the Canadian market after a long period of low demand started at the beginning of 2018. Turkey purchases included, besides Canadian or- igin, Mexican durum which production harvested in May – June was slightly higher than in 2018. In this context, Can- ada strongly increased its sales and shipments through the period April - July so that Jul 31st stocks closed at 1.6 Mio tons and carryover to MY 2019/2020 accounted well below the values expected by the market just three months be- fore. As a very first consequence, bids at farm level started improving in Canada as well. For MY 2019/2020, North African countries turned out being quite neutral to the market. Algeria production has still stayed close to record values, following last year and 2017 abundant harvests and Tunisia output was also on the high side of its historical. Only Morocco reported a sizable production decrease by -45% comparing to 2018 which, in any case, was mostly offset by the huge carryover. As a matter of fact, the supply demand data suggest that the area may show up in the market to buy again only in early 2020 when planting is completed, same as it happened during MY 2018/2019, MOST RECENT DEVELOPMENTS With the whole market looking since the beginning of Sep- tember at the harvest developments in Canada and USA, the current outlook does not seem to provide signals of price trend reversal. On the opposite, the significant delays re- ported from both areas, have been raising during last weeks more worries and uncertainty with regard to final production output for both, quantity and quality. At September 16th of- ficial data reported Saskatchewan durum harvest complet- ed at 48% comparing with last year 82%. In USA, harvest progress was 51% in North Dakota and 73% Montana, still behind in both states comparing with 74% and 97% in 2018, at same date. Also, data for all the above mentioned areas are behind pace comparing with their historical five years’ average. As of today, the current outlook in North America provides actual risks to the acres that farmers will be finally able to harvest, the share of grades n.1 and n.2 among to- tal production and, as a consequence, to prices level and - eventually - quality premiums.