Producers who were hoping for a turnaround in world mustard prices got some sobering news at the Crop Production Show in Saskatoon Jan. 12.
Due to large carryover stocks and expanding production in Europe and the United States, international mustard buyers are in no panic to sign contracts.
And unless there is a major crop failure in Canada or another major mustard producing country, the chances of a quick return to higher prices is slim.
Production contracts now offered for brown and yellow mustard are worth 14 or 15 cents per pound.
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“When buyers look at our carryover stocks and they see numbers like they’re seeing this year, they’re saying to themselves, ‘I don’t need to come to the table early’, ” said market analyst Walter Dyck of Demeter Agro.
“The stocks are there. They already exist.”
According to Dyck, world buyers have come to view Canada as a stable supplier of No. 1 mustard, a perception that has benefitted Canadian growers and international buyers alike.
But overproduction in recent years and expanding acreage have left international buyers in a comfortable position entering 2005.
Each year, Canadian producers have a reliable market for about 150,000 tonnes of No. 1 mustard, Dyck said.
The biggest markets include the United States, which buys the majority of Canada’s yellow mustard, Europe, Japan and Bangladesh.
In the past, European buyers have depended heavily on Canada for large quantities of yellow and brown mustard, but that market has become less stable with the emergence of new producers in the Czech Republic, Poland and Romania.
“Those countries are producing some pretty good quality yellow mustard and it’s stable production,” Dyck said.
“The bottom line is that there’s no demand for Canadian yellow mustard in Europe. We do control the brown market and of course there are countries over there that are looking at the brown markets as well, but so far they haven’t been able to match the quality that Canada offers in brown mustard.”
The Bangladesh market can also be unstable.
In an average year, Bangladesh will buy as much as 40,000 tonnes of oriental mustard from Canada but the majority of that is used by oilseed crushers.
That means a significant fluctuation in mustard prices relative to other vegetable oil sources such as palm oil, canola or soybeans will have a noticeable effect on the demand for Canadian mustard.
“If the price of mustard is too high compared to other oils, mustard just gets taken out of the equation.”
U.S. production also expanded rapidly in the late 1990s, particularly in Washington, Idaho and North Dakota, but in the last two or three years, acreage has stabilized at approximately 200,000 acres.
According to Dyck, Canada’s carryout stocks are large compared to past years and are likely to grow larger. A preliminary production forecast by Statistics Canada suggests Canadian acreage could exceed 700,000 acres this spring. But it appears the market does not need that much production.
Even without the new crop, Canadian producers could be sitting on stocks of 115,000 tonnes by December 2005, including 60,000 tonnes of yellow, 30,000 tonnes of brown and 25,000 tonnes of oriental.
Much of that will be poor quality mustard harvested in the fall of 2004 and it will have to be blended off with future crops, Dyck said. But at least 75,000 tonnes will be No. 1 mustard.
With a stable annual market of about 150,000 tonnes a year, Canadian growers could produce as little as 75,000 tonnes of No. 1 crop in 2005 and still meet all their export requirements for the following year.
Production in 2005 is already forecast at nearly 250,000 tonnes and that would be a burden.
“If Statistics Canada is looking at a figure of 700,000 acres or more, that’s a lot. That’s a big chunk of acres,” said Dyck.
“To meet its export requirements right now, Canada only has to produce about half of what it exports. If you look at that in acres, it really doesn’t amount to much more than 300,000 or 400,000 acres.”
Dyck’s market analysis led some producers to question whether mustard production was a cropping option worth considering.
“At 15 cents for yellow, 14 cents for brown and probably 14 cents for oriental, I’m not sure how many guys are going to stay in the game,” said Rene deMossiac, who has grown the crop since 1988.
“I think those prices are really at the bottom of the scope. We used to do an awful lot of 12 cent mustard but that was at a time when our costs were probably half of what they are now, so I think we’re going to see a severe cutback in acres.”
