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2011 Crop Reports

December 23, 2011

Forward mustard contracting for 2012 has begun in the industry and it is the plan for Olds Products to have a contract price ready to go in the week of Jan 9/12. November forward contracts were 40 cents/lb for yellow and they have been replaced with forward bids of 37-38 cents/lb. I do not believe grower interest to be great at this level but this may suit the market unless there is export demand. 
 
Earlier this month Statistics Canada (SC) released the final 2011 production total and they also included a forecast for 2012 (mustard acres higher by 10% over 2011). 2011 mustard production increased by 10,000 MT in the report and carryover at July 31/12 is now estimated to be 90,000 MT ( 80,000 MT in previous report).  SC also provided a rare breakdown of the production by type (yellow, brown and oriental). Even though the three mustard types have always had different market uses (brown is used mainly in France and oriental mustard has a significant market in Japan plus it is used by dry millers to make mustard flour) they have always been grouped together by SC due to the relatively small production  of brown and oriental compared to yellow. Historically yellow mustard was approximately 70% of the total mustard production but in 2011 the yellow production was less than 50% of the total production!  In the SC report brown mustard production increased a whopping 50% from 2010 to 39,000 MT and yellow mustard production decreased by 60% from 2010 to 50,000 MT . 
 
I do not believe a new trend (more brown and oriental) for mustard production is starting. Demand for brown and oriental from Canada  (not grown in the USA) is quite stable at 20,000 MT-30,000 MT/year each. Europe is increasing the amount of brown mustard they grow (since 2008 brown production has increased in France) and therefore the demand for Canadian brown has decreased but it may now have reached a stable level .
 
Olds Products did not forward contract brown mustard production in 2011 (due to higher 2010 carry forward) and if the increase reported by SC is true then a significant number of brown acres were seeded in 2011 without a forward production contract (spot) and without the knowledge of the market. Brown mustard has traded in a very narrow range in 2011 (32 cents/lb) and this indicates the supply has not moved ahead of market demand.
 
Forward mustard production contracts in 2011 were priced for moderate grower interest due to the larger carry forward balances from 2010. I have never experienced a year where interest in forward mustard contracts was as low as in Saskatchewan and North Dakota in 2011. It was due to a number of factors (price, wet soil conditions) but the winner was canola. In 2012 the interest level for mustard will have to move higher  due to lower carry forward balances for mustard (notably yellow mustard if the SC production for 2011 is correct) . Although canola prices have decreased from September the demand for canola acres in 2012 remains very high and the challenge for the mustard industry is great.
 
Olds Products will continue with a policy of using only certified seed in 2012. The royalties generated from using certified seed are a large contributor to the research currently focused on a higher yielding hybrid variety for yellow mustard.
 
Merry Christmas and Happy New Year
 

November 14, 2011

Spot bids and offers for spot yellow mustard and new crop yellow (2012) hit 40 cents/lb (FOB Farm) briefly in the last week but activity was limited due in part to the uncertainty in the world’s financial and commodity markets that has prevailed  the headlines. Spot bids for brown mustard remain at previous months levels (32 cents/lb- FOB Farm). 
 
The 2012 yellow mustard production will provide  Canada/USA domestic and export requirements for most of 2013 but this time period is a long way off for users  to  lock in now and this also contributed to the 40 cent new crop offer being removed by several market participants.  I believe the 40 cent mustard price offer was set up to create some interest in a market that was not seeing much spot activity since the summer months but when interest returned it was time to back off on the bids until some demand from users would support the bids- and that did not happen. One market analyst that is well followed believes the 40 cent new crop offers will not fade away. 
 
At this time the floor or bottom for yellow mustard pricing is 35 cents/lb FOB Farm and the market realizes this level will not get the acres needed to meet the local and export requirements for 2013.  Furthermore , even though recent pricing is down, the demand for canola, grains and pulses will be high due to relatively small carry-forward inventories. At this time the 2012 contract mustard market is gearing up.  Like any market, the market for mustard needs activity between all participants and ultimately this activity determines the price level to contract the needed acres.  
 
Mustard yields for Olds contracted yellow acres in Alberta and Saskatchewan was 20 bu/acre (1000 lb/acre) in 2012 (5 yr average- 20 bu/acre) and in North Dakota the yield was lower due to the very wet start at 15 bu/acre (5 yr avg- 20 bu/acre). In all areas the mustard could have used a rain in July/August to fill out the pods and push the yields higher to 25 bu/acre. 
 
Mustard quality for the 2011 Olds contracted yellow acres in Canada and in North Dakota looks very good (No.1) and with very little frost damage that was evident across all growing areas in  2010.
I look forward to discussing your plans to grow mustard in 2012. Olds will be contracting the Andante yellow variety and the Centennial brown variety in full force.
 
Please contact me with your comments. 

October 4, 2011

The mustard harvest will look to wrap up this week after over  two months of hot dry weather that matured late crops to a point where frost and weather damage were not a concern. Olds Products anticipates harvest samples will arrive at Pleasant Prairie over the next few weeks from all contracted growers and then a better quality assessment can take place.
 
In addition to all 2010 crop contracted mustard purchased we were pleased to complete our purchase of virtually all of the non-contracted or surplus portion of the production from our contracted growers in the last three months. As a result our inventory of mustard is significantly higher at 30-Sep compared to the previous years but given the low number of 2011 contracted acres and the wet spring that saw us lose 10% of those acres to flooding we were encouraged to find a spot price that allowed us to clean out our growers bins.
 
I hope to put a plan together in early November for shipping the 2011 contract mustard crop ex farm. Olds Products will be looking to buy all 2011 crop surplus production from our growers (100% Andante variety yellow) before July 31/12 in order to bridge (our inventory will be close to zero a year from now) with the 2012 mustard harvest. 
 
My early prediction is an average of 800 lb per harvested acre for the Canadian and USA prairies and this includes acres that will only yield less than 100 lb/acre due to the early extreme wet conditions. Overall the mustard production from 2011 will be close to 90,000 net MT (typical recurring annual demand is 120,000 MT net) from 275,000 acres in Canada (down 40% from 2010) and just 26,000 acres (down 50% from 2010) in North Dakota/Montana/Washington. Statistics Canada is predicting a starting inventory of 125,000 MT (from 2009 and 2010) and this number will keep spot prices at bay but I believe some adjustments are necessary.  My guess is the number is high by 25% due to the acres that did not seed 2010 (15%) and the lower quality (10%) that could not find a market and was moved back to the dirt. Current mustard bids and offers (CDN cents/lb FOB Farm) are as follows:
 
           Bids      Offers
Yellow     35-37     37-40
Brown      31-33     32-35
  
Unless the market runs into yellow supply problems (unlikely) in Ukraine, the Canadian/USA market  may test lower bid levels in the next few months but at this time that has not been evident as the above bids and offers show. Sellers of yellow mustard in the Ukraine have been offering yellow at higher levels to Western Europe than in previous months which has prompted requests for offers (CDN dollar is off 10% from the USD in the last month) from Canada. I do not expect this to continue- there is just too much freight cost shipping yellow mustard from Canada/USA compared to Eastern Europe and our FOB Farm values are higher. Brown mustard was the biggest loser of 2011 acres on a proportionate basis to total mustard acres. Historically brown acres were 20% of the total but it may have dipped to 10% in 2011. The reason has a lot to do with contract demand in January- March which was very low the past two years. Unless the demand returns through better marketing efforts it may continue the slide.
 
Canola was the main recipient of lost total mustard acres in 2011 (about 150,000 acres) and it has run into headwinds as prices dropped significantly (10%) in the last month due to the global economic worries.  Attention will soon move to the 2012 crop and with the removal of the Canadian Wheat Board (at least as it currently exists) will bring added focus in deciding which crops to plant next year.

August 22, 2011

I hope you are having a great summer.  Sample bags along with instructions have been sent to all contract growers who were able to seed this year. We look forward to receiving your representative harvest mustard samples when they are available. Please include your name and harvested quantity on the sample bag/package. Thank you.

Harvest is expected to start this week in Montana and then spread to Saskatchewan and Alberta/North Dakota over the next two weeks. The above average warm weather in August is nicely pushing the crop to maturity. Last week temperatures dipped to below normal daily lows and this reminded me how short our seasons can be.

As plans are being made for harvesting mustard this year it should be noted that minor use registration for Round-Up as a desiccant for mustard at harvest was recently granted in Canada. However the residue tolerance in the USA has not yet been adjusted to the higher residue levels that may be  possible with expanded use. Europe has a  limit of 10 ppm while the USA is at .1/ppm. Round Up is an excellent option at harvest time when crops/weeds remain immature and harvest time is running short. Until the residue limit is raised in the USA it should be used very carefully and in line with the recommended application rates that reflect the current residue limit in the USA. Please let me know if you plan to use this option for your mustard crop. For more information please check the Saskatchewan Mustard Development Commission website (www.saskmustard.ca)

I did my annual crop inspection in late July and early August and I was pleased to see the good condition (although late by 2-3 weeks) of the contracted mustard acres that were able to seed this year. Approximately 10% of our acres did not seed due to the flood conditions in April and May.

Market Update
Statistics Canada recently estimated the acres that will harvest mustard in 2011 had jumped to 360,000 acres with a yield of approx 135,000 MT. This news would normally be quite bearish to prices especially given:

  • - the above average mustard stocks in inventory at 31-July in Canada/USA in both grower and dealer stocks
  • - good mustard harvest in 2011 in Ukraine and Eastern Europe
  • - selling prices for mustard from Eastern Europe remain at roughly half the level of the Canadian/USA origin offers.  
  •  

Spot prices remain quite firm in Canada and the USA at (.35/lb yellow FOB Farm, .32/lb brown FOB Farm, .28/lb oriental FOB Farm) due to:

  • - the markets less bearish views of the 2011 supply and 2010 carry in levels at the grower level. Olds will clean out virtually all 2010 harvested mustard (includes contracted and excess production) by mid September
  • - replacement prices for mustard in 2012 are expected remain at current levels to remain competitive on a return per acre basis with other crops

July 15, 2011

 
It has been almost six weeks since my last report and in that time mustard crops have shown good development (although late) in western growing areas (with the exception of Southern Alberta where wet conditions prevented planting of mustard acres-10%). Eastern growing areas (Eastern Saskatchewan, Eastern Montana and Western Montana) seeded a significantly lower amount of mustard in 2011 (50% less than 2010) due to the wet conditions (wettest ever-200% over normal) and are further behind in development. The drop in 2011 mustard acres can be attributed to:
Excessive wet field conditions are not favorable for mustard
Return/acre was not considered competitive in some key growing areas (price)
 
Most of the mustard in the western growing area (Alberta and Western Saskatchewan) was seeded in late May and much of the Eastern growing area was not completed until early June. These dates are well behind the 10 year average but close to the seeding dates in 2010. 
 
All growing areas are finally getting summer weather (hot and dry) this week and that will help surge the crop forward. Normally the mustard will start flowering in early July but this year it has been pushed back a few weeks. I plan to do my crop inspection in early August this year after the flowers have turned to pods.
 
Spot prices for both yellow and brown mustard are firm in the mid thirties and growers in the eastern growing area, generally, are not sellers due to the fact they were not able to seed a crop this year and they have bin space to hold and wait for higher prices. Growers in the western growing area are more concerned with bin space and are looking to move their non contracted mustard before harvest.
 
Statistics Canada has surveyed growers (prior to May) and the estimate for intended 2011 mustard acres was 360,000. Since then another estimate of actual seeded acres has the total at only 290,000 acres (more weighted in the western growing area). This is the lowest level since the early ‘90s and it is obvious we are on a downward trend when you look at the mustard acres over the last 10 years.  Part of the reason for the downward trend has been
the comfortable stocks that exist going into the new crop year (Aug-July) since 2009 and the lower mustard exports from Canada. Canada has approx 10 months (110,000 MT) estimated supply of mustard at Aug 01/11 of which I estimate half is held by dealers who store the mustard and await orders from their contracted export customers. The supply at Aug 01/12 will be much lower based on normal yields this year.
another reason is the surge in canola acres (another record year-20 million acres in Canada)  and this will have material effects in future years when big increases in mustard acres may not be possible due to canola contamination.
USA production has also increased over the past 10 years and the average production there is higher and less variable than Canada and this has reduced the need for more acres in Canada. However, this year the number of intended mustard acres in North Dakota/Montana (20,000 acres) came to a crashing decrease (50% less than 2010) and I estimate another 25% did not seed due to the wet conditions.
 
Of all the mustard types, brown mustard has shown the biggest percentage drop in contracting interest in 2011 from end use customers, dealers and growers. At this time there is a good flow of brown mustard from non contract production but when this will change is uncertain. 
 

May 18, 2011

2011 mustard planting has begun but more rain is expected later this week. Planting started last week in Montana, Alberta and Western Saskatchewan but Eastern Saskatchewan and Western North Dakota remain too wet to seed. Mustard acres in Canada/USA are still likely to come in over 300,000 acres (30% drop from 5 yr avg) and  these acres are being pushed increasingly more to the western growing area. A dramatic shift to canola has reduced the mustard acres in the eastern growing areas but there is still potential for a significant increase in mustard seeding due to late last minute decisions (short season crop) into early June.

Spot prices continue to hover around 35 cents/lb (FOB Farm) for spot No.1 Yellow and No.1 Brown. Olds Products is looking for a additional yellow contract acres at this time.
 
Spot  mustard demand from dealers is strong due to the smaller expected 2011 crop and the lack of interest from growers. Interest from Europe yellow buyers appears to be low as well due to high stock levels and favorable growing conditions in Czech, Russia and the Ukraine. Demand from US buyers is low due to the high CDN dollar and the significant increase in the FOB Farm price from 2010. Europe continues to rely on  Canadian brown mustard for most of what it needs (30,000 MT) and much of what they need this year and next will come from 2009 and 2010 production. 
 
The carry forward mustard inventory at Aug 01/11 is estimated by Statistics Canada to be the highest in 5 years (net 110,000 MT-all grades and types). If 2011 production (estimated 90,000 net MT) is close to the normal range (average 700-800 lb/acre) for the 300,000 or so intended seeded acres then spot prices for mustard may be pressured lower -  assuming Europe does not need yellow from Canada through 2012. Export demand for Canada 2012 will be close to 120,000 net MT. 
 

April  20, 2011

Snow is finally disappearing from the weather forecasts (at least by next week) and hopefully soon from the fields in all mustard growing areas. The snow and remaining water will likely leave a significant percentage (10 %) of total acres (i.e. low spots drowned out ) that will not be seeded again this year. Mustard acres are projected to be down from 2010 (450,000 acres) to slightly over 300,000 but this number could go higher if growers run out of time to seed other crops that have a longer maturity period. Seeding for mustard will start at the earliest in early May and likely go into mid June. Mustard is considered to have a shorter  maturity period (95 days) than other crops. It yields best when it has finished flowering in early July. .
 
The significant decline in mustard acres will be most notable in Saskatchewan and North Dakota this year. Canola is the main recipient of the lost mustard acres and it is no wonder given the demand for oil. 
 
Mustard demand for 2011 and 2012 will be supplied both by the 2011 crop and the 2010 crop that had a significant surplus. Spot prices for yellow (35 cents/lb) and brown mustard (30-35 cents/lb FOB Farm)moved easily to new crop price levels in March and have held to those levels in April. 
 
The USD continues to loose value this week and this alone will add 2 cents/lb (1.045 CDN$/1 USD) to  mustard exports compared to one year earlier. I believe many customers have delayed their buying program for 2011/12 mustard due to the price shock when comparing their delivered pricing for the previous two years. 
 
The current forecast for much of the mustard growing area is for continued cooler  conditions through May and then returning to normal conditions for June-August. Check out the following link for details:
 
Olds Products will continue to contract with yellow mustard growers through the end of April and most if not all certified planting seed  will be delivered to growers by April 30.  Please let me know if you have any questions.
 

March 21, 2011

2011 contracting with growers is currently 50% behind the pace set in the previous three years but export and domestic buyers also remain in a pause as they review their options for buying to meet their partial or full requirements through 2012. Spot grower prices (Yellow- 30 cents/lb FOB farm- fall 2011 delivery, Brown-30 cents/lb FOB Farm) appear to be moving steadily closer to new crop contract prices (Yellow- 35 cents/lb FOB Farm, Brown- 30 cents/lb). At this time it appears that mustard acreage could fall to 300,000 acres (near 2005 levels) in Canada but until the final acre (likely in late May or early June) is seeded the final number is largely uncertain. It is clear that canola and wheat acres will make strong advances in the traditional mustard growing areas in 2011.

Mustard is considered a short season crop and if the wet conditions continue it will push seeding dates further back and this could add last minute mustard acres. Currently, except for Southern Alberta, all mustard growing areas have abnormally high snow pack and the ground is saturated with moisture. The cold winter we experienced is expected to persist with a cold spring (La Nina). Today is the first day of spring and over 25 cm of snow is forecast over a wide part of the mustard growing area. We do not need this.

Olds Products continues to pursue contracts with growers and given the later start to spring this year we are hopeful that we can contract our required acres (to satisfy our demand through December 2012) using only certified planting seed. We remain committed to contract acres but it appears that much of the other domestic and export market demand is now being met with spot acres. Buying spot allows the customer to buy more to meet immediate needs whereas buying contract acres usually suggests a longer term. It all comes down to the risk/reward perspective that each customer has to determine for their business. There is no doubt that the reported significant carry forward mustard balance (130,000 MT at July 31/11) from 2009 and 2010 will be needed to meet demand in 2011/12.

February 7, 2011

Mustard prices are showing signs of a response to increased spot demand (it has been a few years) and the need for new crop acres. Despite the reported (Statistics Canada) on-farm inventory at Dec 31/10 of 190,000 MT (highest in five years), yellow and brown spot prices quickly moved to 30 cents/lb last week! The demand for spot yellow is more for delivery toward the end of 2011 but the demand for spot brown is immediate.

A significant amount of brown mustard was bought off farm last week at 30 cents/lb and I believe the demand for spot brown will not relent until the market is covered by a good harvest this fall (a year ago the market was trading brown basis 18 cents/lb and likely selling it short). Canola has taken many brown acres off the market in the past two years and it will be a challenge to win the acres back. The current spot price will raise some growers’ eye brows but many decisions have already been made to buy canola planting seed.

Current 2011 contract prices are 35 cents/lb for yellow and 30 cents for brown and oriental. Mustard pricing for new crop is chasing surging prices for canola and wheat. A year ago there was little chase. A significant amount of the on-farm yellow inventory at Dec 3/10 will be purchased in 2011 for shipment to customers in 2012 and this will reduce demand for new crop acres. I do not expect more than 400,000 acres of mustard in 2011 for Canada/USA (down 20% from 2010).

Moisture concerns relate more to the excess soil moisture expected this spring that can delay seeding. All growing areas had plenty rains in September (to say the least) last year and the snowfall this winter has been above average.

Olds Products has recently eagerly started the grower contracting program for 2011. Our program includes the use of certified seed developed by Ag Canada (Andante-Yellow and Centennial-Brown). Please contact our contractors (Bart or Peter Hribar) for more information.