Growers and users must try to bring stability to the mustard market, says an analyst and marketer of the crop.
Steve Foster, mustard manager for Viterra, believes the current high price environment is a good time to move the industry toward a more closely linked value chain where buyers pay a little more than they’d like to get production, and producers give up peak prices to give users more certainty.
There hasn’t been any certainty this year, as prices have more than doubled from 12 months ago.
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Heat last summer hurt yields. Despite a 32 percent increase in seeded area, production rose by only about six percent and demand for Canadian mustard, helped by reduced production in Ukraine, is expected to outstrip supply.
“Ending stocks are very much in very low, almost deficit position,” Foster said.
Agriculture Canada projects stocks at the end of the current crop year will fall to 20,000 tonnes, down from 91,000 tonnes last year.
Yellow mustard prices recently have been 50 to 55 cents per pound. In January 2007, prices were around 20 cents.
Foster thinks buyers have much of their needs covered and will try to hold out until spring when, if there are good prospects for the new crop in Canada and Eastern Europe, prices could be near 35 to 40 cents per lb. for old and new crop.
Seeded area will have to jump to about 625,000 to 650,000 acres to ensure production covers demand. Last year seeded area was about 440,000 acres.
“The big challenge is to get the acres in the ground,” he said. “Normally you need an attractive mustard price to get growers to do that. The challenge we have this year it that most commodity values are higher.”
Another worry is that southern Saskatchewan and Alberta are dry and if the situation continues into spring farmers might avoid the crop.
This spells another year of attractive prices and the potential to challenge this year’s prices.
“My concern is there is not a lot of carryover and any crop challenge will have a major impact…. Even if we get the acres we want, next year we are going to have a low carryover giving us strong prices.”
But there is a point where high prices will cut off demand, for example in prepared meat where mustard is used as a filler.
“If they (processors) can’t get a price that works for them, they will look for something else. The grower wants a high price, but there is a fine line where all of a sudden it doesn’t work anymore.”
Foster would like the industry to focus on farmers who regularly grow mustard because it works for them in their finances and rotations. The goal would be to eliminate the acreage and price swings and to match production to demand.
“I want them to work closer with end use customers.”
One idea might be to develop longer contracts, perhaps three years, at prices that are profitable for producers and processors.
Also, the nature of the market is changing, with end users becoming more specific about their needs.
“I believe mustard as a commodity is disappearing. It is becoming something totally different, totally niche.”
Many users do not buy on the basis of grade, but on their own specifications. Processors are asking for specific varieties that fit their production process and that means using certified seed.
“A lot of end use customers want traceability right back to the grower.”
