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Buoyant durum prices confound wheat market weakness

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Is the price of penne about to soar? Not all wheat prices are in the doldrums.

Values of durum wheat, the type used in making pasta, are soaring, rising by some 8% to $420 a tonne, excluding freight, in July for Canadian exports, from St Lawrence.

In the US Lakes, values rose by some 6% to $380 a tonne. In France's Port La Nouvelle, prices, jumped 24% to E335 a tonne, according to Agritel.

These gains contrast with 8% falls in Chicago's front September futures contract, and the Paris November lot.

Canada wet

Durum's resilience reflects in part lower-than-expected sowings in North America, curtailed by lower prices during the spring harvest period but also by wet weather which prompted a further downgrade last week by Canadian officials to their sowings estimate.

At 1.91m hectares, the area of durum harvested in Canada this year will fall by 5%, fuelling a 23% drop to 6.51m tonnes in output, factoring in a return to average yields from the bumper 2013 result, according to the AAFC farm ministry.

Canada's exports, the world's biggest, are expected by the International Grains Council to remain close in 2014-15 to last season's levels thanks only to large inventories left over from the 2013 crop.

'Same problems as in milling wheat'

However, the biggest spur of the latest upswing in prices has been the diminishing prospects for the European Union harvest, the world's biggest, which has been setback by the same problems of harvest-time rains which have beset the main soft wheat harvest, causing quality damage.

"Durum has the same problems we are seeing in milling wheat, writ even larger," a European grain trader told Agrimoney.com.

The CWB, the grain export monopoly, raising its forecast for returns on its durum pools by Can$10 a tonne, said that "the durum market continues to strengthen as quality concerns plague the durum crops in Europe as a result of untimely rains.

"Harvest delays were experienced in Italy and Greece due to excess moisture and since then areas of the French durum crop have also received heavy precipitation."

The result in Italy, responsible for about half of European Union output, is particularly significant.

Net importer?

Meanwhile, "Mediterranean and European demand are expected to remain strong," the CWB said.

Indeed, the EU could, unusually, become a net durum importer in 2014-15, with the International Grains Council on Thursday cutting by 600,000 tonnes to 7.0m tonnes its forecast for the bloc's harvest.

That would be the weakest result in 13 years, and fall below consumption pegged at 7.3m tonnes.

The IGC cut its forecast for the world durum harvest by 800,000 tonnes to 34.6m tonnes, down 9% year on year and the smallest crop in 12 years.

Higher beef prices too…

"A poorer outlook for global durum production, particularly in the EU, dominated market sentiment during the month," the council said.

And, with beef prices looking like getting firmer too, to judge by comments from the likes of Australia & New Zealand Bank and Societe Generale, spaghetti bolognese may no longer prove a cheap meal option.

By Mike Verdin

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