Dear Charlie,
How the world changes!
9. Market Focus - Durum elevator price varies
by Mike Jubinville of Pro Farmer Canada
The amount of new information about the global durum supply and demand situation has been limited in recent weeks. The grade profile for Western Canadian durum this year is better than average, meaning limited supplies of lower grade durum, as well as lower price discounts than average for lower grade durum.
For the past two months, durum prices have generally been in the $8.25 to 8.75 a bushel for No. 1 Canadian Western Amber Durum 13 per cent for deferred delivery. No. 3 CWAD is priced about 50 cents a bushel lower.
During this time, the track Thunder Bay cash price for No. 1 CWAD 13 per cent has been drifting around US$355 a tonne. Consider Thunder Bay a worst case disposal outlet and that's about C$350 a tonne. Freight and miscellaneous costs like shrink and dockage is at minimum $35 a tonne, but can vary $5 a tonne depending on Saskatchewan delivery location. Grain companies are likely to shoot for a $10 a tonne margin. So then, ballpark $350 a tonne less $45 a tonne is $305 a tonne or $8.30 a bushel.
But periodically, a bid such as $8.75 a bushel surfaces. Often, this is location-specific, company specific and defined tonnage. This is likely going to another destination.
Consider $8.25 a bushel a "laying in the weeds" bid that can arbitrage into Thunder Bay. Now, consider a sales opportunity at $8.75 a bushel as something unique at this time. The entire durum price bar can move up and down, but these types of specials have had no trouble uncovering sufficient farmer sales thus far. The Thunder Bay shipping outlet will become more dormant during winter as the St. Lawrence Seaway closes. This means shallower bids with more reliance on outlets like the West Coast or the United States.
A few weeks ago, a 50,000 tonne vessel carrying a mixture of No. 1 to 3 CWAD grades left the West Coast headed for Europe. Relatively cheap ocean freight and rail freight (say from western Saskatchewan to Vancouver, instead of forcing the same supply through Thunder Bay) makes the economics viable if grain companies choose to allocate West Coast capacity to durum. Such an event would have been a rarity in the old CWB system, as it chose to move majority of durum through the East Coast.
PFCanada likes topping up sales in the $8.75 a bushel area when it comes available, but growers will likely need to look at deferred delivery pricing.
Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 204-654-4290 or visit www.pfcanada.com to find out more about his services.
From FCC;
http://www.fcc-fac.ca/newsletters/en/express/articles/20121116_e.asp#story_6
How the world changes!
9. Market Focus - Durum elevator price varies
by Mike Jubinville of Pro Farmer Canada
The amount of new information about the global durum supply and demand situation has been limited in recent weeks. The grade profile for Western Canadian durum this year is better than average, meaning limited supplies of lower grade durum, as well as lower price discounts than average for lower grade durum.
For the past two months, durum prices have generally been in the $8.25 to 8.75 a bushel for No. 1 Canadian Western Amber Durum 13 per cent for deferred delivery. No. 3 CWAD is priced about 50 cents a bushel lower.
During this time, the track Thunder Bay cash price for No. 1 CWAD 13 per cent has been drifting around US$355 a tonne. Consider Thunder Bay a worst case disposal outlet and that's about C$350 a tonne. Freight and miscellaneous costs like shrink and dockage is at minimum $35 a tonne, but can vary $5 a tonne depending on Saskatchewan delivery location. Grain companies are likely to shoot for a $10 a tonne margin. So then, ballpark $350 a tonne less $45 a tonne is $305 a tonne or $8.30 a bushel.
But periodically, a bid such as $8.75 a bushel surfaces. Often, this is location-specific, company specific and defined tonnage. This is likely going to another destination.
Consider $8.25 a bushel a "laying in the weeds" bid that can arbitrage into Thunder Bay. Now, consider a sales opportunity at $8.75 a bushel as something unique at this time. The entire durum price bar can move up and down, but these types of specials have had no trouble uncovering sufficient farmer sales thus far. The Thunder Bay shipping outlet will become more dormant during winter as the St. Lawrence Seaway closes. This means shallower bids with more reliance on outlets like the West Coast or the United States.
A few weeks ago, a 50,000 tonne vessel carrying a mixture of No. 1 to 3 CWAD grades left the West Coast headed for Europe. Relatively cheap ocean freight and rail freight (say from western Saskatchewan to Vancouver, instead of forcing the same supply through Thunder Bay) makes the economics viable if grain companies choose to allocate West Coast capacity to durum. Such an event would have been a rarity in the old CWB system, as it chose to move majority of durum through the East Coast.
PFCanada likes topping up sales in the $8.75 a bushel area when it comes available, but growers will likely need to look at deferred delivery pricing.
Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 204-654-4290 or visit www.pfcanada.com to find out more about his services.
From FCC;
http://www.fcc-fac.ca/newsletters/en/express/articles/20121116_e.asp#story_6
Comment