FYI Durum politics

[boarderbloke]

yesterday, MGE hard red spring wheat was up over 12 cents because the USA loan rates were anounced in North Dakota, spring wheat was increased $0.50/bus, at the same time durum was increased $1.50/bus., bring durum loan rate to $6.00.

Spring wheat was up because it was seen that spring wheat would loose acres to durum, all because of the loan rate.

[boarderbloke]

So theres a "heads up" for all you smart farmers thinking no one is going to be growing Durum.

[wmoebis]

Boarder could you explain how the US loan rate works?

[checking]

"loose acres", is that American lingo, or a wind problem?

[TOM4CWB]

The CWB is saving the international durum sales for the US.

We are expected to store our durum... For nothing because we are 'designated area' growers from the backwaters of stupidity (Western Canada). Why would anyone treat us growers fairly... what would motivate them?

Triffid screws us up... hardly a peep... what fine compliant citizens we are... we must be getting 'gold stars' for our hospitable nature!

[charliep]

The US loan rate is effectively a guaranteed price with quirks. Difference between the marketing loan and posted county price is paid to the farmer as a subsidy. Similar to the SPE, the calculation are done at certain time of the year and would equal the difference between the loan rate (county specifice) and the posted price for that region (assumed positive - loan rate more that posted rate) times an assumed yield. Real price is whatever the farmer sells for. Over simplified but hopefully helps. Below is USDA information.

[URL="http://www.ers.usda.gov/briefing/Wheat/policy.htm#marketingalaldp"]USDA programs[/URL]

<a href="http://origin.www.fsa.usda.gov/Internet/FSA_Notice/lp_2148.pdf">durum loan rate</a>

Always reminded of the story of the bear and the two hikers. The US would appear to be putting on their running shoes. Canada would appear to be retaining our steel toed 400 pound hiking boots. The bear looks hungary.

[boarderbloke]

I guess checking stands for "grade school teacher", frick man I've made few spelling errors here, GO CHECK !

"loose arces" is lingo for, "the weather is great for April, and I'm in a fricking hurry" !

[checking]

You are actually correct on the name reason, boarderbloke.

I know all about the April hurry. I just finished my tax papers, and the losers took the rest of my loose change! I'm not complaining.

Which side of the border are you on? I wouldn't want to poke an American in the eye? I realize it's a different spelling, but hey, just checking.

[charliep]

Interesting to look at US durum numbers.

Annual US durum domestic consumption is about 80 to 90 mln bu (2.5 MMT).

Annual production bounces around but in the 80 to 100 mln bu. range (2.5 MMT).

Durum exports and imports somewhat similar at close to 40 mln bu depending on year/quality of their crop.

Likely trying to hold durum production up in the US/continue to buy from Canada on an as needed basis. Buy high quality Canada/export 3 HAD.

[rockpile]

Charlie, let's keep the Board out of this for the
moment, but I have a couple of questions regarding
the impact of the loan rate on durum. Having
experienced the impact of the Export Enhancement
Program from the 80's (buy one, get two free), as
well as the ridiculous EEC export subsidies, one
conclusion is obvious from this latest move that the
US Govt is telling American farmers to go grow
durum, we've got your profitability covered. So,
what price range will US grain companies and the
USDOC be able to peddle this year's crop at and
whereabouts would the global market settle at,
because this is obviously a win-win for both US
producers and global importers? Secondly,
regardless of marketing model used (Board vs
open) what price range would Canadian durum
have to settle at to compete? I agree with your
observation that US 3AD will go export and US
domestics will buy Canadian 1AD, likely at a
discounted price that they will have created.
Rockpile

[charliep]

Not sure how to answer your questions. Given the late announcement,
a newsletter I have access to indicates only a 10 to 30 % increase in
acres. Can easily rob from spring wheat acres highlighting agronomy
issues as well.

Don't expect this increase in US acres to have an impact on
international prices - will potentially impact Canadian exports but that
impact is as much reliant on quality and yield as a decision on acres.

Would more movement of Canadian durum impact international prices
- could be but at least farmers would have product moving and be able
to make their own judgement on store versus sell. Could be wrong but
I suspect farmers individual decisions about movement/pricing may not
be that much different than the collective decision by the CWB.

[charliep]

From the March seeding intentions report.

Durum planted area for 2010 is estimated at 2.22 million acres, down 13 percent from the previous year.

The below link provides durum acres over the past 5 years.

[URL="http://www.ers.usda.gov/Data/Wheat/YBtable01.asp"]US durum acres[/URL]

[rockpile]

Thanks, Charlie, good info. Can the market handle the
anticipated increase in Canola acres and doesn't palm
oil factor in anymore? Someone mentioned that rye
was worthless, but it was fetching 5 to 5.50 last fall in
this area. This spring is setting up like the perfect
storm for just about every commodity. I'd really watch
the input side and not get carried away on a spending
spree. Also, I predict five to six weeks of cool and wet
weather hampering seeding.
Rockpile

[charliep]

Canola is obviously impacted by world vegetable oil fundamentals.

Vegetable oils are being driven by increasing consumption (both
human and biofuels). Canola is able to participate in this as well as
appealing to North America and world demand for healthy oils
(lower trans fats and saturated fats). There will not be an issue in
selling all the canola Canada produces.

Having 60 to 70 percent market share in a crop like durum doesn't
mean anyone including the CWB can manipulate prices. USDA is
changing programs to move what amounts to a small percentage
of spring wheat acres to durum in the Dakotas - impact is to force
Canada to look for off markets. Canada is a residual supplier to
North Africa to fill in the gap after their using their domestic
production.

[cityguy]

As a point of reference, the posted county price in Ward county (Minot) is $3.37/bu. New Crop loan is $6.08. Don't know what the PCP will be at new crop but if the $3.37 were to hold the durum farmer is looking at a $2.51/bu cheque in hand. Last year the USDA spent $106 million on durum LDP's at an average of $1.20/bushel. You can bet US farmers will be hitting any bid they can at harvest, pocket the LDP and move durum to market and keep farm space for other crops.