Mustard growers and buyers are in a showdown.
The growers are naked and unarmed, while the buyers are wearing full body armour and toting bazookas.
“The buyers are just standing back and naming their price, and that’s not acceptable to the grower,” said Regina mustard broker Elwood Lawrence. “But I think (the growers) are going to have to bite the bullet and release some of these stocks to get this surplus down.”
Mustard prices have collapsed over the last year due to oversupply, with the best bids for yellow and brown mustard now coming in at 12 cents per pound, and oriental mustard drawing almost no bids at all.
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Lawrence said the only recent bid for oriental mustard he has received was for 10.5 cents per lb., “which I won’t take to the grower because it is an insult.”
Advisers say there is no chance of a short-term or winter rally, and the only chance of a price rise is if enough producers sell enough mustard at low prices to reduce massive
surplus.
“We’re in a massive glut position now, and have been for over a year,” said marketing adviser John Duvenaud. “We’ve got lots of old crop and a big, good quality new crop. There is more than ample mustard.”
Mustard prices are volatile. In 2002, prices spiked above 70 cents per lb. for yellow mustard after the European crop failed.
European processors scrambled to find mustard in Canada, the world’s dominant producer, and were willing to pay what it took to get what they needed.
“We had a short crop that year and they came in here with open chequebooks and anyone with mustard did real well,” said Duvenaud.
“Then we started growing it big time.”
The stampede to get into mustard since those 70 cent days whipsawed the price down to today’s level. Last year’s massive harvest, most of which is still sitting in farmers’ bins, has been followed by a smaller but still large crop. That has not helped the situation.
“The stocks are building rather than decreasing,” said Duvenaud.”Farmers tried to cut back, but there is just too much carry-in.”
Canada has sometimes produced 75 percent of the world’s trade in mustard, which means any surge or slump in Canadian production has a huge impact on world prices. The present slump is the flip side of the 2001-02 surge.
Duvenaud said farmers shouldn’t assume they can wait out the bad prices to put the buyers under pressure. The buyers have no need to hurry.
“The buyers are sitting on their hands. They’re quite complacent. They know there’s tonnes of mustard out there that they can pick up any time,” said Duvenaud.
Lawrence said farmers need to start selling their crop, regardless of the low prices, in order to clear the backlog.
“The longer it sits there in the bin, the longer the buildup,” said Lawrence. “It’s going to take six, eight months before this (market) can even begin to revive.”
Lawrence said this year proved the value of production contracts. Many growers did not sign contracts in the spring because of relatively low prices.
In retrospect, those prices of 14 cents look better than today’s prices of 11 to 12 cents.
Some farmers are refusing to sell at today’s prices, with one telling Lawrence, “I’d rather dump it in the slough than take that price.”
That’s probably not a good financial decision for a decent quality crop, Lawrence said. But there is little hope for selling any of the 2004 crop that was severely frost damaged. No one will make a bid for that.
“That is stuff that may have to be dumped in the slough,” he said, jokingly.
Big quantities of frost-damaged mustard are not even affecting the market, because no buyers will touch it, he said.
