Durum decline: Ag mainstay in N.D., Montana losing ground to other crops
Keith Deutsch knows that part of his job is promoting his crop. He knows he needs to be realistic, too. "It just doesn't look too good for this spring," says Deutsch. a Plaza, N.D., farmer and president of the U.S. Durum Growers Association. "It ...
Keith Deutsch knows that part of his job is promoting his crop. He knows he needs to be realistic, too.
"It just doesn't look too good for this spring," says Deutsch. a Plaza, N.D., farmer and president of the U.S. Durum Growers Association. "It may sound strange for someone from the association to be saying that."
But Deutsch and other area durum boosters say they have to acknowledge the obvious.
"It's a critical time for durum right now," says Jim Peterson, marketing director for the North Dakota Wheat Commission, which promotes durum and other wheat grown in the state.
Durum, used to make pasta, has deep roots in North Dakota. The state typically accounts for more than half of the nation's production.
But durum acreage in North Dakota and northeastern Montana, the nation's second-leading durum producing area, has been declining for years because of adverse weather and rising competition from other crops. The trend is expected to continue this year, with attractive prices for competing crops causing farmers to plant less durum.
If durum acreage falls too much more, the state will be hard-pressed to maintain the infrastructure needed for a "vibrant" durum industry, Peterson says.
To be sure, durum has had acreage rebounds from year to year. But the overall trend is clearly down.
North Dakota farmers planted 4.4 million acres of durum in 1980, 3.1 million acres in 1990, 3.25 million in 2000 and 1.8 million in 2010. They planted only 750,000 acres in 2011, although that reflects the exceptionally wet spring a year ago.
Unofficial estimates peg this year's durum acreage in the state at 1.2 million to 1.6 million. The U.S. Department of Agriculture will issue its official prediction of durum acreage on March 30.
Of course, the actual number of durum acres in the state won't be determined until spring planting is completed.
Weather will be a factor in the final number, as will the so-called "battle for acres." Enough acres must be allocated to all the crops grown in the region so that production of each crop will meet demand for it. If the market senses that acreage for a crop might come up short, the price of that crop rises to make it more attractive to potential growers.
"We need a price that will get us to plant it," Deutsch says of durum.
Durum prices are down
Currently, durum is fetching $8.45 per bushel at area elevators surveyed weekly by Agweek, compared with an average of $9.05 at the elevators a year ago.
Area farmers can lock in a price for new-crop durum, or durum harvested this fall, that's varied from $7.25 to $7.75 per bushel, officials say.
It's not just the attractive prices of competing crops that have worked against durum. The region's long wet cycle has hurt the crop, too. Durum does best with cool summer nights, long warm days, adequate but not excessive rain and a dry harvest, according to the North Dakota Wheat Commission.
Too much moisture hurts durum's quality and typically leads to big discounts, or price reductions. That happened in 2010, when harvest rains plagued many area durum farmers.
Because durum is susceptible to big discounts, it's considered a riskier crop to grow than spring wheat, which is used to make bread. North Dakota also is the nation's leading producer of spring wheat.
To offset the higher risk of producing durum, area farmers typically want a higher price for it. Unless farmers get that higher price, or premium, they may plant less-risky spring wheat.
Currently, spring what is fetching about $8.26 per bushel at area elevators surveyed weekly by Agweek. That's about 20 cents per bushel more than durum, which some area farmers say isn't sufficient to offset durum's higher risk.
Here's one more set of numbers to consider.
Spaghetti and macaroni sold for an average of $1.317 per pound at supermarkets nationwide in January, according to information from the Bureau of Labor Statistics.
That trails only the record $1.328 per pound in November 2011. The national per-pound spaghetti and macaroni price has been trending higher since May 2011, when wet weather cut into durum acreage.
Canadian Wheat Board
Another factor that could work against U.S. durum acreage, at least in the short run:
A new Canadian law that goes into effect on Aug. 1 will end the Canadian Wheat Board's monopoly to market wheat and barley for milling or export. Canada is the world's leading durum exporter, and the end of the monopoly could bring more Canadian durum into the United States.
Several grain companies in the United States already have signed contracts with Canadian farmers to buy grain for delivery after the monopoly ends, according to a report from Reuters.
CHS, the largest grain cooperative in the United States, has purchased durum from grain handlers in Western Canada and eventually will move it to CHS elevators in the United States, according to the report.
"This is phenomenal. (Ending the monopoly) is huge to the world," Tom DeSmet, vice president of marketing for CHS, told Reuters. "The durum world, the grain world, has got their eyes on Canada big-time."
Some U.S. durum boosters say it's too early to predict what impact the end of the monopoly will have on their crop.
"We have more questions than answers at this point," says Jim Peterson, with the North Dakota Wheat Commission.
One of the uncertainties is how much durum Canadian farmers will plant this year. Some reports indicate canola acreage in Canada could rise sharply, with much of the increase coming at the expense of durum.
In the long run, the end of the Canadian wheat monopoly could be good for U.S. durum, says Vince Peterson, vice president of overseas operations for Arlington, Va.-based U.S. Wheat Associates, which promotes U.S. wheat exports.
The Canadian Wheat Board has sold durum for export at prices below those of U.S. durum. The board's demise could lead to more equitable export prices and more export opportunities for U.S. durum, he says.
More attractive options
Numbers from the North Dakota State University Extension Service's 2012 Projected Crop Budget illustrate that durum doesn't stack up well financially against some other crops grown in the region.
In north-central North Dakota, where durum is a popular crop, durum is projected to bring a return to labor and management of $63.46 per acre.
The projections also call for a return to labor and management of $198.29 per acre for dry beans, $117.23 for malting barley, $86.34 for corn and $80.98 for soybeans.
It's the same story in northwestern North Dakota, where durum is particularly common.
The per-acre projected return to labor and management is $38.28 for durum, $115.02 for malting barley, $108.08 for corn, $88.42 for lentils and $52.43 for flax.
Andy Swenson, an NDSU Extension Service farm management specialist who worked on the projected crop budgets, says it's impossible to predict how durum acreage and prices will fare in coming years.
A return to drier conditions in northwestern North Dakota would boost durum's prospects, Swenson says.
But given current prices and weather conditions, durum isn't as attractive as some other crops, making farmers more reluctant to grow it, he says.
2011 'an aberration'
Durum farmers on the Northern Plains are frustrated by what they see as pasta companies' lack of concern that durum prices aren't competitive and that durum acres have been declining.
Pasta companies see things a little differently.
North Dakota's 2011 durum acreage was "an aberration" because of the exceptionally wet spring, says Jim Kulp, Philadelphia-based purchaser for Minot (N.D.) Milling, a division of Philadelphia Macaroni Co.
"There's not a decline, necessarily," he says.
Durum acreage in the state has fluctuated in the past five years -- for instance, a little more durum was planted in 2010 than in 2009. Nonetheless, the long-term trend is down.
Dakota Growers Pasta Co. in Carrington, N.D., is a subsidiary of Viterra Global, a big Canadian agricultural company.
Questions for the companies were referred to Holly Gibney, manager of media relations for Viterra in Calgary, Alberta.
"Viterra is firmly committed to durum production in North America and we are working closely with producers and the commercial trade to supply our Carrington pasta plant," she says.
The Washington, D.C.-based National Pasta Association, the trade association for the pasta industry, was asked for comment by Agweek. An association spokeswoman told Agweek that none of its staff was qualified to comment. She also said she would find a representative from a member company willing to comment and contact Agweek if she located one. That didn't happen.
Though North Dakota and Montana dominate U.S. durum production, the crop is grown in South Dakota and Idaho, too. Production in those states sometimes is known as "northern tier" durum.
Durum also is grown under irrigation in the desert valleys and lowlands of Arizona and California. This so-called "desert durum" is planted from December through February and harvested in May and June. Durum on the Northern Plains is planted in the spring and harvested in the fall.
The big drop in Northern Plains' durum production last year benefitted desert durum, says Michael Edgar, general manager and vice president of Barkley Seed in Yuma, Ariz., which is involved with desert durum.
"We took advantage of it (production problems in North Dakota)," he says.
To offset the production problems on the Northern Plains, companies that buy and use durum began contracting to buy desert durum that will be harvested this spring.
Desert durum is grown under "greenhouse conditions" and faces far fewer weather variables than northern tier durum, Edgar says.
Farmers who grow durum in Arizona and California can raise other crops, too. The options, which vary from state to state and even within each state, include alfalfa, cotton and produce. Durum growers in the region raise more of the alternative crops, and less durum, when prices of the competing crops are more attractive, Edgar says.
Farmers on the Northern Plains, many of whom once had few alternatives to durum, now have more crop options, too, he notes.
Durum prices shot as high as $12 per bushel last year, reflecting the small North Dakota harvest. However, the price jump didn't help farmers who couldn't plant their durum because of wet fields.
Since then, relatively plentiful durum supplies elsewhere in the world have dampened prices, says Vince Peterson with the U.S. Wheat Associates.
Not surprisingly, given reduced U.S. durum production last year, the United States has been importing more durum and exporting less of it.
The United States imported 3.8 million bushels of durum grain, flour and products in December 2011, up from 2.5 million in December 2010 and 2.8 million bushels in December 2009, according to the U.S. Department of Commerce.
America exported 2.6 million bushels of durum grain, flour and products in December 2011, down from 4.6 million in December 2010 and 4.1 million in December 2009, according to the Commerce Department.
U.S. durum has at least two things going in its favor, says Peterson, with the North Dakota Wheat Commission.
Consumers like pasta, and that doesn't seem likely to change anytime soon, he says.
Also, no other countries around the world are beginning to grow durum in a big way, which means no new big competitors for U.S. durum, Peterson says.
Vince Peterson says the population of some countries that eat a lot of durum is growing rapidly and that those countries don't have the capacity to greatly increase their own durum production.
That bodes well for the U.S. durum industry over the next 10 and 20 years, he says.
Two farmers' views
Two U.S. durum farmers say they're not giving up on the crop, even though its outlook this year isn't bright.
Gordon Stoner, who raises durum in Outlook, Mont., says durum fits well into his operation and that he doesn't have a great alternative to it.
Spring wheat can be hit with price discounts, too, he notes.
Through the years, many durum farmers on the Northern Plains have learned to adjust to price swings, he says.
"When we get the price, we plant a little more. When we don't get the price, we plant a little less," Stoner says.
Mark Birdsall, a Berthold, N.D., farmer and seed dealer, says durum fits well into the climate in some parts of the region.
Even though its price isn't attractive, "Durum is going to be a viable crop in certain areas," he says.
But he and other area farmers say durum prices need to improve for acreage to stabilize.
"If we don't get the price, acres are going to keep going down," says Deutsch, the Plaza, N.D., farmer and U.S. Durum Growers Association president.
Durum is one of six classes of U.S. wheat. The others are hard red spring, hard red winter, hard white, soft red winter and soft white. The classes are determined by hardness, color and time of planting, according to information from the North Dakota Wheat Commission.
Durum (derived from the Latin word for hard) is the hardest of the six classes. That density, combined with its high protein and gluten strength, make it the wheat of choice for top pasta products.
Gluten is a kind of protein that provides elasticity to dough.
Durum kernels are amber-colored and larger than those of other wheat classes.
When durum is milled, the endosperm (or part of the seed that provides food for the developing embryo) is ground into a granular product called semolina.
Water and semolina are mixed to form stiff pasta dough that's forced through dies to produce many different shapes.
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