On Thursday, October 11th, the USDA released the October WASDE report, which gave us further insight into global wheat and American durum production and carryout numbers for 2018/19.
When the report came out at 12 PM Eastern, the most noticeable update was that the numbers matched up against what was suggested in the Small Grains Report on Friday, September 29th.
Let’s dig in:
The USDA raised 2018/19 American durum production by 4 million bushels from the September WASDE estimate of 73 million bushels. This new durum production number of 77 million bushels (or 2.1 million metric tonnes if converting bushels to tonnes) would also be +41% year-over-year.
Two weeks ago, we discussed durum exports picking up, but we also mentioned the USDA’s estimate of American harvested acreage. This production number is off a total harvested durum area of 1.977 million acres, -6.6% year-over-year. This intuitively means that average American durum yields came in at 39.3 bushels per acre, +52% year-over-year.
Back in September, the USDA was estimating that 2018/19 American durum ending stocks would come in at 36 million bushels. The USDA is now estimating that America will go into the 2019/20 crop year with 44 million bushels of durum, the second straight month of increases. Worth noting though, the July WASDE estimated 2018/19 durum carryout at 41 million bushels and, in August, it was 31 million bushels.
Clearly, the USDA has gotten more bearish on durum demand.
To be honest though, this is actually more of a supply issue than demand, as durum production has rebounded significantly (as mentioned above). The 41% jump in production from 2017/18 to 2018/19 doesn’t match the demand increase.
Explicitly, 2018/19 durum production in the U.S. will be 22.5 million bushels or 612,620 MT more than 2017/18.
Comparably, total 2018/19 U.S. durum domestic use is expected to fall by 2 million bushels year-over-year, but exports are expected to increase by 12 million bushels. This means a net demand increase of just 10 million bushels year-over-year.
As a reminder, there’s quite a bit of the Canadian durum harvest still left in the field, which will likely lay on durum carryout in 2018/19. What we mean by this is that, like 2016/17, a lot of the poor quality durum will likely just end up going into the feed market right away, tightening up total available supply going into the 2019/20 crop year.
We’ll dig a bit deeper into durum carryout and what, if any pricing trends were starting to see emerge in this weekend’s GrainCent Durum Digest.
See you Sunday morning!