Durum???

[Jagfarms]

The pros for Durum look lower next year than this year. What are your thoughts on the Durum pros. A lot can happen by next year. The Durum I am hauling in this July I was thinking of selling in the new crop year thinking there is some room for the price to go up next year. With all the crazy weather we have been having there is a chance of a frost or poorer grades of Durum here in Canada and I am thinking the final price could better new crop year for #1 high Prot Durum. It is a big gamble but I have a few weeks to think about it. Just wondering other peoples thoughts about this.


Jason

[charliep]

General thoughts for discussion.

1) Main export markets are North Africa/Europe. North Africa is just finishing their harvest and from what I know has a good crop. European crops are also in good shape.

2) I will look for comments from others on the crop situation in the major durum areas south of highway 2 but I recognize likely will highlight the lateness of the crop. Whether there is a quality problem will be up to mother nature.

3) Just an observation that the CWB is reported to also be holding off on wheat sales in general until more is known about the quality of this years crop. Both of you may be right. You may be wrong as well. I often wonder (perhaps tongue in cheek) whether anyone includes costs of carry in this decision (interest and storage) let alone the risk factor of lower prices.

Your 2003/04 1CWAD 13 protein PRO is $229/t (port). 2004/05 - $206/t (port). Fixed price contract - $193/t (port). FPC - Not even worth a comment except to say no way. Will durum prices increase by $23/t over the next year? Hard to say but I wouldn't hold my breath.

Recommendation - price into 2003/04. If you want to hold a position in market, buy MGE wheat calls. Won't cover you on the durum/CWRS spread but if weather is bad this fall, both would go up in value.

What are others thoughts?

[TOM4CWB]

Charlie;

Just got back from Sask.; a massive crop could be produced... a little heat and there will be huge tonnage produced.

It certainly looks like the drought is broken for this year... and the hoppers are drowned out.

Jason;

The holding of CWB "C" 03-04 durum is a bad sign for 04-05... from a farmer's prospective. I would rather speculate with the grain from 04 production... rather than placing the 03 crop in the same 04-05 pot as well... I don't see an early resoulution on the marketing choice side... so we must be satisfied with expected CWB performance on Durum.

[charliep]

Thanks for highlighting the durum contract calls TOM4CWB.

70 % on the "A" series. None on "B". 25 % on the "C". My math may be wrong but that tells me that durum farmers still have 22.5 % of their old crop supplies in the bin. Unless things change, this old crop supplies will be sold at a $23/t discount and with cash flow stretched over an additional 18 month period.

Interesting comment on the system in that an organization can control a farmers access to market/cash flow. In the case of durum, the CWB's ability to control supplies can have an impact on selling prices/returns to pool. When the farmer is forced to carry this much supplies between crop years, are you necessarily better off?

One of the ideas I have heard suggested is to run the pool on the first two contracts with the regular/fpc contracts and offer a cash price/separate pool to allow the market to clear supplies on the "C" series. Thoughts?