Miller Magazine Issue: 118 October 2019

62 COVER STORY MILLER / OCTOBER 2019 Same as for the major players, the outlook is not positive in other durum areas as well such as Kazakhstan where, on top of a 10% decrease for durum planted area in June, rainy weather at harvest (almost completed at the time of this article) affected the quality of a large share of the crop, and Australia where the third dry year in a raw is assumed to negatively impact the yields for the incoming harvest (Nov-Dec), particularly in key area like Northern New South Wales and Southern Queensland. DURUM WORLD SUPPLY - DEMAND BALANCE ARETÉ FORECAST As a whole, the global durum supply demand balance outlook (Areté forecast) is very consistent with recent price behaviors. Global production is forecasted down by -2.5 Mio tons versus MY 18/19 and only partially offset by high- er carryover (mainly sitting in USA) for +0.9 Mio tons. This scenario is supportive for bigger trade volumes (+0.4 Mio tons), particularly due to Italy and Turkey import demand, as confirmed by the most updated official export and sales data from USA and Canada and the two purchase tenders issued by TMO during September. Being world durum con- sumption quite inelastic to prices, ending stocks are fore- casted to decrease by 1.7 Mio tons and stock / use ratio to decrease at 22%, down from last MY 27%. As above mentioned, next major factors to monitor in the short term to fine tune the global balance and understand further market developments will be the final outcomes of Canadian and USA harvest. Afterwards, the second half of MY 2019/2020 will be defined also by the choices of EU farmers for the incoming planting season which, despite the relevant price improvement already occurred, do not look promising for durum wheat, according to current mar- ket rumors and preliminary surveys with producers. MID-TERM OUTLOOK, EXOGENOUS MARKET FACTORS On top of market fundamentals, some further variables deserve a quick overview in order to define as much as possible future trade and prices devel- opments in the durum market. EU has been going through its Glyphosate approval renewal pro- cess, which deadline is set for De- cember 2022. Due to strong public opinion focus on it, the subject has already proven having the potential to be a game changer for the durum market as it has happened in 2018 and part of 2019 when Canadian trade suffered the consumers’ opposition to the herbi- cide usage, particularly in Italy - one of Canadian main export destinations – and durum world trade patterns have changed and have adapted accordingly. The de- bate is still ongoing and the EU Commission decisions will be crucial in the mid and long term scenarios, as well as any possible action implemented by single member states, such as specific restrictions for Glyphosate uti- lization. Besides debate about Glyphosate usage, durum wheat origin for pasta production has also been a more and more relevant driver of EU industry sourcing choic- es. Again, the regulatory framework and the incoming developments at EU level are pivotal to understand and assess risks and opportunities for exporters and traders. The new EU Regulation for raw materials’ origin labelling will be effective starting from April 2020 and - particularly for Italy – the interaction with existing regulations will be a substantial variable to define the future scenario. On the consumer’s side, it is notable the growth of demand for pasta made by domestic durum wheat during last years, starting from Italy, but also with some French and Spanish pasta processors recently following the trend. Moreover, Government policies implemented to support the local durum farming through funding programs have enrolled increasing hectares since 2017, same as farm- ers’ application to planting contracts. World durum production trends and trade flows will likely be influenced by all or some of the above listed variables and the actors in the supply chain may benefit a careful watch over of further developments of ongoing processes.