Analysis: High pasta prices set to boil over as Canada's wheat withers

TAG Oil

30/08/2023 11:00

By Gus Trompiz, Rod Nickel
       PARIS/WINNIPEG, Manitoba, Aug 30 - Pasta lovers must
brace to pay even higher prices for their favorite dish, as
drought in Canada and bad weather in Europe damages crops of
durum wheat and reduces supplies available to flour millers and
food companies.
Italy's government called a crisis meeting in May as prices for
the staple food jumped by more than double the national
inflation rate. With global production of durum wheat headed for
a 22-year low, Italy's famed pasta makers have had to turn to
unusual suppliers such as Turkey for their main ingredient. 
In Toronto, Continental Noodles knew there was trouble when the
cost of a 20-kilogram bag of semolina flour, milled from durum,
rose 24% in a few weeks of July to C$26 ($19.15). Family-owned
Continental, which sells fettuccine and ravioli to Whole Foods
and the general public, is also paying more for tomatoes used in
sauce after crop setbacks in Spain and India.
One of Continental's owners, Vincent Liberatore, fears prices
will rise even more now that farmers in top durum exporter
Canada have seen their harvest devastated by drought. He said
the business will absorb the costs as long as possible,
uncertain how much more consumers will pay.
    "The population has tapped out - everything has been going
up," Liberatore said. "The biggest stress for us business owners
right now is the unknown - the roller coaster up and down."
Retail pasta prices rose about 12% this year in Europe and 8% in
the United States, according to market research firm Nielsen.
Prices of another staple, rice, have also spiked following
export curbs in India.
     The International Grains Council forecasts 2023/24 global
durum production at a 22-year low, pushing world stocks to their
smallest in three decades.
  
     
    CANADA DRY
    When the Prairies turned dry this summer, Canadian farmer
Darold Niwa saw hopes of a bumper durum harvest dashed.
    "Until June 10, I felt I was sitting pretty," Niwa, 67, said
from his farm near Oyen, Alberta. Now "we'll probably take a
loss."
    Niwa's durum has produced only six to eight kernels per
head, instead of the usual 45-52. His break-even level is 32-35
bushels per acre (bpa) but he is harvesting just 10-11 bpa,
about 1 metric ton per hectare.
    Canada accounts for around half of global trade in durum but
this year's harvest looks to be the country's second-smallest
harvest in 12 years. Canadian farmers are expected to produce
4.3 million metric tons of durum this year, Statistics Canada
reported on Tuesday.
    "The pipeline in Canada is empty," said agriculture analyst
Jerry Klassen.
    The United States is also expected to harvest a smaller crop
due to dryness, while drought has cut production in Spain and
severe weather has produced mixed quality in Italy and France.
Deteriorating supplies drove up the Euronext futures price
benchmark  EDWc1  to a six-month peak in early August. The spike
led major importer Algeria to cancel a durum tender in early
August. The major importer announced a new tender this week.
     
    TURKEY TURNS EXPORTER
In Italy, which relies on imports to complement domestic crops,
some firms are turning to new supply sources. Turkey has emerged
as a surprise durum exporter. 
     Market estimates place Turkish durum export sales so far
this season at 300,000 metric tons, with most bound for Italy.
  
    Traders said Turkey is tapping a bumper harvest and high
stocks to reverse its usual role as an importer. Its exports are
widely expected to reach 500,000 tons and possibly 1 million
depending on government export approvals.
    The Turkish trade ministry did not respond to a request for
comment.
     Turkish exports have cooled Mediterranean and North
American durum prices, but they should resume their climb when
Turkey runs out in a month or two, said Philip Werle, partner at
Spain-based Northstar Brokerage.
  
    Short-term supply relief has also come from Russia, which
has shipped over 100,000 tons to the European Union since July
according to EU import data.
Pasta giant Barilla, which processes local durum in various
countries, said it currently saw no critical supply issues.
Consultancy Strategie Grains says pasta makers could possibly
use more soft wheat where regulations allow and consumer income
is limited. Durum, the hardest wheat, produces pasta with the
prized "al dente" firm texture, unlike soft wheat. In North
Africa, durum is also used to make couscous.
    "There's not going to be enough durum to supply the whole
world at a normal demand level," Strategie Grains analyst
Severine Omnes-Maisons said.
    In the meantime, Vincenzo Martinelli, president of the durum
section of Italian millers association Italmopa, nervously
awaits the outcome of the Canadian harvest.
    "Without Canada, prices will only go up," he said.
        
    ($1 = 1.3578 Canadian dollars)

(Reporting by Gus Trompiz and Rod Nickel; additional reporting
by Emilio Parodi in Milan, Ceyda Caglayan in Istanbul; Julie
Ingwersen in Chicago and Michael Hogan in Hamburg; Editing by
Caroline Stauffer and David Gregorio)
((mailto:gus.trompiz@thomsonreuters.com; +33 1 49 49 52 18;
Reuters Messaging:
rm://gus.trompiz.thomsonreuters.com@reuters.net/))