FYI Durum politics

[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.

[charliep]

I note that loan deficiency payments are not directly tied to how
a US farmer markets their grain. Durum sold in the fall could
be forward priced, sold off the combine at the daily price or
stored into the winter/spring. LDP is simply a calculation and
payout.

What has more impact on prices? The monstrous carryover of
durum as a result of the CWB deciding to hold durum off the
market for the past 2 years or an extra 200,000 to 600,000
tonnes of US durum as a result of the loan rate. The unknowns
in tomorrow's Stats Can seeded acreage forecast will be way
bigger than the above let alone including weather uncertainty.
The issue at the present time is there is more durum that
markets at the current price.

[cityguy]

Charlie is right in that the only stipulation is that the farmer have "beneficial" interest in the durum. That being said, a $6.08 loan will encourage more off combine selling than would normally be the case. The extra 200,000-600,000 in and of itself may not be a big deal, but the $6.08 doesn't just apply to that. Also - you can bet any buyer is simply going to pull/lower the bid given this news, whether it's for Canadian durum / US / Mexican / local.

Stats Canada's durum report better have acres down at least 25% which is probably about 4.2-4.4 million. Better that it be down under 4. If it's not under 4.5 then there's a problem.