Markets

Durum booked in hectic Australian shipping stem

Liz Wells, January 29, 2021

Harvesting durum trials at Boggabri in northern NSW in late November. Photo: Andrew Watson

AUSTRALIA’S biggest durum export season since 2016-17 is under way with the bulk shipment program progressing as a vessel loads in Newcastle for destination Italy.

The national crop is estimated to weigh in at 483,000 tonnes (Table 1), and with domestic consumption at around 240,000t, more than 200,000t could make its way to export.

Trade sources say at least 150,000t has already been booked.

Return to the market

Mellco director Steve Mellington said most of the export business was written in the early part of last year, when the Australian dollar was trading at less than US65 cents, and improved seasonal conditions meant Australia was looking at its first big export surplus since drought hit NSW in 2017.

“Currency gave exporters out of Australia an opportunity, and that sent a strong enough price signal to growers to get durum into the ground,” Mr Mellington said.

“Our export customers are keen to source Australian durum, and having a surplus position this year is a real positive.

“We’re now able to re-engage with our customers.”

Along with Italy, they include Middle Eastern and North African nations.

2019 2020 5yr avg*
Queensland 3,000 25,000 8,000
New South Wales 30,000 310,000 140,000
Victoria 10,000 10,000 10,000
South Australia 100,000 138,000 144,000
TOTAL TONNES 143,000 483,000 302,000

Table 1: Industry production estimates for durum production.

Five-year average data are sourced from Australian Crop Forecasters for each state except Victoria.

Grain Central has used a nominal 10,000t guess for that state.

Shipping slots limited

Ahead of Northern Hemisphere new crop durum coming on stream mid-year, GrainTrend director Peter Howard said logistics could well limit how much could be shipped.

“The stem’s a problem in Australia,” Mr Howard said.

“It’s pretty well booked out in Newcastle into July.”

Mr Howard said demand from Algeria, Italy and Tunisia was evident, and more cargoes could well be booked if the Australian dollar weakened and made Australian durum better able to compete with Canadian.

“The demand is there; it’s the execution that’s difficult.”

Mr Howard said bulk freight rates had risen sharply in the past month, and this was factoring into export pricing.

Containerised exports to Australia’s major durum markets remain problematic because of multiple logistics issues on- and offshore.

Grower sales slow

In Narrabri, Priag principal Kevin Schwager said strong grower sales early in last year’s growing season were seen.

“It’s been a bit slow of late, but we are expecting there will be additional strong demand from Italy, the Middle East and North Africa.

“One thing that’s restricting us is the stem.

“There is space in Brisbane, so there could be two-port loads.

“There’s strong demand for every commodity out of Australia, and it’s interior logistics as well as the stem that are under pressure now that we’re shipping.”

Mr Schwager said many growers had significant tonnage of durum held on farm.

“They say they’re wanting better prices than they’re seeing now.”

Mr Schwager said those may eventuate, especially if the Australian dollar softens.

“A lot of countries are coming out of their COVID-induced comas, and they’re going to come shopping to fill up their internal supply chains.”

High-quality offering

A hallmark of the harvest just gone has been very high quality in durum and bread wheat.

“This year’s been really good for quality, although it does vary,” Mr Howard said.

A largely dry finish without being dry enough to prompt problems with the crown rot pathogen, coupled with tailored agronomics from growers, was to thank.

Isolated cases of low falling numbers as caused by rain on ripe grain, and some low testweights, have been the main reasons for any downgrades.

DR premium holds up

This harvest also saw unusually high specs on bread wheat.

It collapsed the premium for Prime Hard (APH) domestically and globally over ASW-type wheat to only a few dollars per tonne, as opposed to years when high protein is hard to find and the premium can be $20/t or more.

This stretched the premium between APH and durum to more than $100/t at times last year, roughly triple what can be expected in most years.

The DR1-APH spread has now narrowed to about $45/t, the lowest point seen in the past year.

This is still historically high, and contrasts with years when an oversupply of durum and an undersupply of APH can see durum trading at a discount to the premium milling-wheat grade.

Long-term Liverpool Plains durum grower Ross Durham said domestic and global demand for pasta throughout COVID as an affordable family staple had helped support prices.

“Durum had a fairly strong premium at planting time; that softened when we got into harvest, but it’s still maintained a bit of a premium.

“One of the reasons is that durum has maintained a healthy demand everywhere.”

This is despite Canada last year harvesting its second-biggest ever durum crop, which was countered somewhat by a European crop of reduced quantity and mixed quality.

Canada, the United States and Mexico are Australia’s main competitors in the export market.

Mr Durham said the quality profile of the northern NSW and southern Queensland crop, nearly all of which is exported, has boosted its appeal in the export market.

“What we found, and what I heard from other growers, was that about 95pc of what was grown last year was DR1.”

NSW area could drop

Mr Schwager said a larger-than-normal winter-crop planted last year post drought has restricted the size of the summer crop currently in the ground, and growers were looking to return to a more normal split this year.

Despite durum’s price strength in comparison to bread wheat, Mr Schwager said the size of both crops could well be down in northern NSW this year as compared to last.

With durum the last of the winter crops to be planted in June or even July, early rain could see its area slip.

“Growers are becoming more attuned to planting on moisture, not on price.

“The summer-crop area north of Narrabri isn’t huge, and people will be wanting to get into a more normal rotation from the next planting.”

Recovering from drought

Australian durum production fell drastically in 2017, 2018 and 2019 as a result of the drought which decimated production in northern NSW.

As Australia’s single biggest durum-producing region, its production fell from the normal 200,000t or so to less than the 75,000t or so produced in southern NSW, mostly under irrigation.

In September, the South Australian Government pegged SA’s durum crop at 95,760t from 37,800ha, both down on the five-year average of 118,700t from 49,100ha.

However, better-than-expected yields are likely to boost the SA figure.

SA is a significant producer and sometime exporter once the needs of San Remo, Australia’s biggest pasta manufacturer, have been met.

Northern NSW is thought to have produced around 250,000t from the most recent harvest, with irrigation country in the state’s south producing the balance.

Australian durum production is thought to have sunk to around half the normal level in the three years prior to 2020, and the premium grain was sold at well above export parity to domestic consumers.

“In drought years, the domestic feed market will pay more for durum, or any other grain, than the export market will,” Mr Mellington said.

 

 

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