(Resource News International) — Durum supplies in Canada are expected to climb significantly during 2008-09 as export opportunities erode amid increased competition.
“Canada will remain a dominant participant in the global durum export market, but the extent of that domination will decline given that Europe produced an extremely large durum crop,” said Mike Jubinville, an analyst with the farmer advisory service ProFarmer Canada.
With Europe producing a durum crop of over 10 million tonnes, the need to import Canadian durum will decline significantly, he said. The large crop also means Canadian durum will compete with European supplies into the North African market.
“I think the large European durum crop will be very problematic in that Canada will not be able to export enough to keep the domestic carry-out from building to a burdensome level,” Jubinville said.
The Canadian Wheat Board, which is the major durum exporter, in turn will need to keep delivery opportunities restricted, he said.
Jubinville said the burdensome supply of durum in Canada was amplified by the fact that output of the crop was much larger than expected.
“Statistics Canada’s final crop output numbers for 2008-09 were expected to show Canadian durum production was in the 5.3 million- to 5.5 million-tonne area,” he said.
Agriculture and Agri-Food Canada is working with a 2008-09 durum production estimate of 4.9 million tonnes. During 2007-08, Canada’s durum production was 3.681 million tons.
“There will just not be enough business for the durum volume Canada has available,” Jubinville said.
Agriculture and Agri-Food Canada durum export program for 2008-09 was estimated at 3.9 million tonnes, which would be up from 3.1 million in 2007-08.
Jubinville felt that with Europe not bringing in Canadian durum and in fact competing with Canada in some markets, Canadian durum exports during 2008-09 will be hard pressed to hit the three million-tonne level.
Adding to the lack of exports will be the fact the CWB, which markets durum on behalf of western Canadian producers, continues to seek a premium for those supplies, he said.
“The (Canada Western Amber durum) price for No. 1 grade is roughly C$100 above where the global market is at present,” he said.
“If you look at the Minneapolis durum index, that value has fallen US$2 to $3 a bushel since the start of October, making the price the CWB is seeking, overpriced,” he said.
“In this case, the CWB will be able to maintain a high price, but they are going to have to sacrifice volume.”
If the CWB knocks down the price, Jubinville said, then Canada’s durum export potential might be able to climb some.
Greg Kostal, an analyst with Kostal Consulting in Winnipeg, said Canada typically is a dominant durum supplier, but that was dependent on needs from the Mediterranean and Europe.
“The global durum export demand is hazy at this point, given that the huge crops in Europe will make it more difficult for Canada to complete,” Kostal said.
“The CWB will need to, as a result, navigate more of its durum sales into North America instead,” he said, noting that failure to move Canada’s 2008-09 durum crop will result in a huge jump in carry-out supplies.
Kostal also said that because the CWB tries to maximize price, there is a chance of tonnage moving offshore declining.