The mustard seed sector should start to think about developing multi-year contracts because the volatility in prices could discourage growers.
Western Canadian acreage and the number of growers have fallen from the early 2000s.
“If you are on the buying side of the industry, you should be a little bit concerned about that,” said Marlene Boersch of Mercantile Consulting Ventures.
The mustard market has experienced wild price swings over the past 10 years with highs of $65 per hundredweight and lows of $15.50. In the last year, prices have ranged from $52 per cwt. to $29.
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Growers also face challenges maintaining quality and preventing contamination from canola seed, Boersch told the Saskatchewan Mustard Development Commission Jan. 12.
“We have been losing acres to more profitable commodities like lentils and peas, and once you lose them it is very hard to get them back.”
As a result, there is an incentive for users of mustard seed to come up with good production contracts and maybe even consider multi-year contact options, she said.
The mustard price outlook for 2017-18 is not exciting, she said.
A small acreage and poor yields two years ago led to strong prices for 2016-17, and growers responded with the largest seeded area since 2009 at 524,000 acres. Even with the weather challenges this past year, yields were good, averaging 20.7 bushels an acre.
That produced a 233,000 tonne crop, up 88 percent from the previous year. With a fairly small carry-in of 35,000 tonnes, the total supply is 270,000, up 32 percent for a stocks-to-use ratio of 54 percent compared to 20 percent at the end of 2015-16.
“So that is why your forward contracting price has fallen quite a bit. The market is not as tight,” Boersch said.
Spot bids for yellow mustard in January 2016 were soaring above 55 cents per pound because of the shortages in 2015, but they quickly fell off.
Prices for delivery this winter are closer to 30 cents per pound, and new crop yellow mustard bids are around 35 cents
“That shows you people are relatively comfortable that there will be enough supply next year,” Boersch said.
With fairly weak prices and a large carry-out, Boersch expects Canadian growers to slash 2017-18 seeded area by about 32 percent to 350,000 acres.
She expects yields won’t be quite as good as this harvest, so she forecast 19 bushels an acre leading to total production of about 148,000 tonnes, down 37 percent.
But with the big carry-in of 90,000 tonnes, total supply would likely be down only about 10 percent from the current crop year.
The mustard export picture is fairly stable, but there are concerning developments, she said.
The United States takes 60 to 65 percent of Canadian exports, Europe takes 22 percent and Japan four percent.
Canada has been losing market share in Europe because of stronger competition from Russia and Ukraine.
“We have some real concerns about market stability (in Europe),” she said.
Ukraine and especially Russia have experienced big swings in seeded area and yields, which means European buyers are leery about relying too much on producers from the east. This could be a competitive advantage for Canada if it could assure the Europeans that production here will be stable.