Large mustard estimate tough on bids

Ag Canada expecting 371,000 acres, but a much higher estimate prompted users to stop contracting with processors

There is a huge discrepancy in mustard acre projections for the 2018-19 crop year.

Agriculture Canada believes the upcoming crop will be a similar size to last year’s crop at 371,000 acres.

Chuck Penner, analyst with LeftField Commodity Research, recently told a CropSphere audience that he expects 500,000 to 550,000 acres.

It doesn’t sound like that big of a divide, but for a small crop such as mustard, it’s the difference between a bullish and a bearish outlook for prices.

Kevin Dick, president of All Commodities Trading Ltd., a Winnipeg based mustard processing firm, was leaning more toward Penner’s outlook until Penner made his CropSphere presentation.

That changed everything.

There were several end users in the room, and once they heard Penner’s forecast, which at the high end would be the biggest crop since 2004, they were breathing a collective sigh of relief.

In the aftermath of the presentation, end users stopped contracting mustard with processors such as All Commodities Trading.

In turn, processors dropped their new crop bids for yellow mustard to 35 cents per pound from 40 cents at the CropSphere show and brown mustard to 32 cents from 35 cents.

Dick has subsequently reduced his spring planting estimate to 400,000 acres, down from 450,000 to 500,000 acres before Penner’s presentation. It is now more in line with Agriculture Canada’s number.

“We’re really going into a dangerous situation,” he said.

That is because there will be no carryout for anything but oriental mustard in Canada and the rest of the world heading into the new crop year. In addition, there are drought conditions in the mustard growing areas of North America.

“If we get sub-400,000 acres because the contracting price is no longer attractive to the farmer and it continues to stay dry, I say look out on mustard,” said Dick.

He is stunned that end users are refusing to contract at least a portion of their needs for 2018-19.

“I’ve been doing mustard for almost 20 years now and I am alarmed that the end buyers aren’t coming to the table to support the processors,” said Dick.

Penner believes there will be an exodus out of lentils in southern Saskatchewan because growers are put off by bids of 16 cents per pound for red lentils and 24 cents for greens. They are also concerned about the lack of buying interest from India.

“Farmers this year are looking for alternatives far more than they have in the last couple of years,” he said.

Mustard prices are good compared to other crops with old crop yellow mustard selling for about 38 cents per lb., brown fetching 43 cents and oriental 32 cents.

Penner said it has been feast or famine with mustard the past couple of years. Growers harvested 236,000 tonnes of the crop in 2016-17 and last year produced about half of that amount.

He is a little nervous about yields because of lingering drought conditions in southern Saskatchewan, where the crop is grown. His yield forecast is 917 lb. per acre, which is slightly above the previous five-year average.

The other wild card for yellow mustard will be the size of the U.S. crop.

Growers south of the border produced 96,270 tonnes in 2016-17 and attempted to grow a similar-sized crop last year, but yields were disappointing and production fell by 37 percent.

Dick has been doing some contracting in the United States, and he gets the feeling that plantings will be about the same for the third year in a row at around 95,000 acres.

He believes supplies in the Black Sea region are dwindling, just like they are in North America, based on reports he has heard.

“I’m a firm believer that they’re running out of this current crop. I’m a firm believer,” said Dick.

His message to growers is to take a wait and see approach.

“I see no reason for them to panic. I see no reason for them to rush out and contract at these values,” said Dick.

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