In many Italian pasta industries, concerns are growing over a substantial supply squeeze of a key ingredient: durum wheat. Extreme temperatures and drought in Canada, a top exporter of wheat, have led to dire harvests sending prices rocketing to 13-year highs.
Durum wheat shortages have made 2021 a difficult year also for Italian pasta company De Cecco. The company’s Commercial Director, Carlo Aquilano, says: “It’s been quite difficult, especially at the beginning, because of course, traders were just getting the position of waiting to see what was going on in terms of price increases”.
Canada, which accounts for two-thirds of global durum wheat trade, is expected to cut output to nearly 50% below 2020 levels. The picture in Italy is also troubling. Domestic forecasts for the durum crop, which cover most Italian pasta-makers needs, were recently cut to 3.7 million tonnes from 4.3 million. This will leave some food producers exposed to the wider market turmoil when the local crop runs out. And this is something that could spill over into the coming years.
“I guess that probably in one year or so, from 2022 to 2023, the problem could become a little bit smaller than now, but we will not be back at the level of the pre-crisis or the pre-pandemic,” says Aquilano. Around 300 tonnes of pasta are produced every day at the De Cecco factory in Fara San Martino (Chieti, Abruzzo). But the current supply concerns could well dampen this production.
REASONS FOR THE CRISIS
“The international and Italian durum wheat markets have been in turmoil for over 12 months. Durum wheat prices have continued to fluctuate steadily upwards since July 2021, despite the high levels that already characterized 2020 compared to historical averages in recent years. Since July, prices have been subject to very strong inflationary pressures increasing up to +65% for the international product, which exceeded 550 €/tonne (source Italmopa Set 2021), and +100% for the national product, which reached 540 €/tonne,” says Aquilano.
According to Aquilano, the reasons for prices increase in 2021 can be attributed to drivers that involved:
- real production downturns in exporting countries such as Canada and the United States, where cultivable areas were affected by particularly adverse weather conditions due to anomalous drought and temperatures far above average. This happened in the middle of the vegetative phase of durum wheat, with very strong repercussions on yields. The data updated in November further downgrade Canadian production: Canada 2.654 Mton (2021; -59.6% compared to 2020 volumes) vs 6.5 Mton (2020); USA 0.9 Mton (2021) vs 1.8 Mton (2020) – (IGC-Italmopa estimates);
- substantially stable EU production: 7.8 Mton (2021) vs 7.7 Mton (2020) – (IGC-Italmopa estimates);
- Llow level of international durum wheat stocks in early 2021, following record consumption in the pandemic year;
- increased demand for domestic wheat, whose production (of 3.85 million tons) is not sufficient to meet the demand of the Italian industry, thus leading to the historical need to import international durum wheat (about 40% of the cereal needed for domestic production);
- doubts about the yields of the coming Australian production. Estimated to be in line with historical averages, it has been recently conditioned by climatic phenomena that jeopardize its progress;
- increased costs for the entire supply chain, including energy and fuel costs, logistics costs, fertilizer costs and costs for sowing wheat for the 2022 harvest;
- delays in late 2021 planting in Italy due to drought in October and heavy rains in November and December 2021, which could negatively impact the 2022 harvest.