On Thursday, the USDA released the July WASDE report, which offered a few key updates to the US durum supply and demand balance sheet. We need to point out that the USDA came up with the first peek at the new crop (2018/19) U.S. durum marketing year. Today’s report stood out thanks to a jump in yield expectations for the U.S. durum crop.
Here’s our breakdown of the numbers.
The USDA’s July WASDE report showed that American farmers will produce 75 million bushels (or 2 million tonnes) of durum wheat in 2018. This figure is 37% higher than last year’s production estimate of 55 million bushels (or 1.49 million) and 6% higher than the 5-year average of 71 million bushels (or 1.93 million).
The main trigger for this was a jump of new crop durum yield to 40.7 bushels up 58% year-over-year, or 3% from the 5% from the 5-year average of 39.4 bushels per acre.
Last week, we pegged 2018/19 U.S. durum production at nearly 2 million tonnes. This was fairly accurate, as it’s not way off from the USDA’s estimate reported today.
From a supply and demand balance sheet perspective, we can look at ending stocks to get an idea of where we sit.
On the old crop durum front, the USDA raised the old crop ending stocks by 5 million bushels (or 136,000 tonnes) or 16% month-over-month to 36 million bushels (or 980,000 tonnes) in June. On the supply side of the U.S. durum equation, the most notable changes were in imports, which were raised by 2 million bushels (or 54,430 tonnes) or 4% to 52 million bushels (or 1.41 million tonnes) in June. A slightly stronger import pace for U.S. durum imports supports the upside price potential for old crop durum prices.
On the demand side of the old crop durum equation, the most notable changes were in domestic use and exports. In particular, the U.S. domestic use was raised by 4 million bushels (109,000 tonnes) or 5% month over month to 89 million bushels (2.42 million) in June. Old crop exports were lowered by 2 million bushels (or 54,400 tonnes) or 10% to 18 million bushels (490,000 tonnes) in June.
On the new crop durum balance sheet, the USDA came up with a bearish scenario. In particular, the 2018/19 ending stocks are pegged at 41 million bushels (1.12 million tonnes) that is up 13% year over year and up 39% from the 5-year average.
On the supply side of the 2018/19 equation, new crop durum imports are pegged at 40 million bushels (or roughly 1 million tonnes). That is sharply down by 23% year over year and 7% from the 5-year average. A lower than anticipated U.S. import pace is a bearish development for Canadian durum producers.
On the demand side of the 2018/19 equation, U.S. domestic use is pegged at 110 million bushels (or 3 million tonnes) up 3% year over year.
On the exports front, USDA anticipates that the U.S. will export 25 million bushels (or 680,000 tonnes) of durum. That is up 39% year-over-year and down 11% from the 5-year average of 28 million bushels (or 760,000 tonnes).
A few other key points from the report:
– USDA expects a higher U.S. durum production in 2018/19.
– North American durum supplies are expected to get hefty in 2018/19.
– A lower than expected U.S. durum import pace in 2018/19 limits the upside price potential for durum prices in Canada.