I recently chatted with a relatively large durum buyers who had some interesting thoughts to say about the state of the current durum wheat market.
Granted, we can take comments from the buy side with a grain of salt, it’s worth sharing.
First, they talked about the size and quality of the durum crop that came off in Western Canada this year: Their words?
“5 million tonnes of the best quality ever”
Specifically, they mentioned how growers in central areas of the Canadian Prairies are being active sellers but those in the southern, more drier areas are selling some durum, but most are expecting prices to go up because of the dryness.
Sidenote: this is the exact definition of cognitive bias: one grower isn’t worried about moisture and makes sales, while the other is worried a moisture issue and so isn’t as willing to sell. You could argue that they’re thinking about cashflow for next year but I’m just hoping you understand how one can get stuck in peering out only their own window and no one else’s….
Second, they also mentioned the other 2 million tonnes of the 2016/17 crop that was leftover that now was available to blend in with the surprisingly large 2017/18 crop.
They admitted that the downside was the situation with Italy being dead-quiet, and as a result, less than ideal exporting activity, given the size of the crop.
As a second sidenote, we discussed the Italian durum situation a few weeks ago.
The buyer also discussed how US millers are generally covered until seeding and some all the way out til summer.
Finally, the buyer suggested that Canadian acres getting planted to durum this year could touch 6 million acres, despite the dryness.
At 6 million, this would be a 15% jump over last year’s crop and 11% more than the five-year average.
Currently, I’m not as bearish, thinking Canadian durum area will top 5.5 million acres. At today’s prices, one could argue that my estimate is more realistic.