One analyst argues that Statistics Canada has underestimated production, while another believes supplies are tight
Analysts and the trade disagree about the size of this year’s mustard crop.
Chuck Penner, an analyst with LeftField Commodity Research, recently told Real Agriculture that he doesn’t put much faith in Statistics Canada’s estimate of 103,000 tonnes of production.
That is 24 percent smaller than last year’s crop and 41 percent below the 2018-19 harvest. It would be the smallest crop since 1983.
He said mustard prices should be 50 percent higher than they are today if that was the case.
“But they’re not. So what that tells me is that StatsCan has underestimated that crop considerably and we’ll see a bigger estimate come out in December,” Penner told Real Agriculture.
Kevin Dick, president of AC Trading Ltd., disagrees with Penner. He said the best way to gauge the size of the crop is by the selling interest of farmers.
“Let’s put it this way — if I buy 100 tonnes in a week, that’s a big week. Whereas in previous years we’re talking 400 or 500 (tonnes),” he said.
“Unless farmers are extremely bullish mustard and they’re locking their bins on mustard and selling everything else, I don’t think there’s a whole lot more acres out there.”
Statistics Canada estimates farmers planted 256,880 acres of mustard. Dick said it may end up being as high as 290,000 acres, but there is no way the number starts with a three.
Sales have been slow. Buyers are executing on contracts that are already on the books but not conducting any new business.
“I haven’t seen a single inquiry from Europe since harvest,” said Dick.
That tells him there is plenty of Black Sea mustard to satisfy the European demand.
Rayglen Commodities confirms that mustard demand is slow.
“COVID restrictions (are) really weighing on the issue,” said the brokerage firm in a recent grain market commentary.
“Buyers continue to report to us that overseas demand remains very sluggish.”
Yellow mustard is the only type that experiences much price volatility because the demand for brown and oriental mustard is static.
Yellow prices tend to take off when there is strong demand out of Europe, such as in 2001 when flooding in Eastern Europe combined with a North American drought drove prices up to the 60 to 70 cents per pound range.
That is not in the cards this year. Farmers need to keep in mind that production contracts were 17 cents per lb. then compared to 40 cents this spring, said Dick.
Yellow mustard prices were still at that 40 cent mark last week, while brown is at 30 to 31 cents and oriental at 26 to 28.
“I do see a few cent uptick in the spring, but I don’t see anything higher than that,” he said.
That is one area where the two are in agreement.
Penner acknowledged that there has been poor demand out of Europe the last couple of years due to stiff competition from Russia.
So it won’t take much of an increase in production in Statistics Canada’s December report to make supplies feel heavy.
“I think there is room for more upside, but it’s not going to go screaming higher the way the earlier StatsCan production numbers would have suggested,” he said.
Dick said it is “pretty obvious” that Canadian supply is adequate to meet the existing level of demand in the marketplace.
However, he said if farmers plant another small crop next year, that would likely ignite the mustard market.
Buyers know that and it should be reflected in the prices contained in the production contracts they make available in late-December or early-January.
Rayglen reports that some new crop mustard bids have already surfaced and the prices are strong.