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2014 Crop Reports

December 9, 2014

Yellow mustard shipping to the cleaning plant in Drayton, ND for October – November was close to 2,000 MT (approx. 4.5 million lbs) from virtually all the Olds Products 2014 contracted yellow growers.  In December we are planning to pick up approximately 500 MT from our contracted brown mustard growers along with an additional 500 MT of yellow mustard.  Thus far the weather has cooperated and no trucking delays have been reported.  We expect an even pull through July 2015 when we plan to have all of the 2014 production (contract and over-production) picked up.  Olds Products will again rely 100% on their contracted production of mustard for our condiment production.

Spot yellow mustard prices have fallen from late summer highs.  Offers from growers are higher, but I believe, due to the late Spring increase in 2014 seeded acres of spot mustard in Canada (37% higher than 2013 based on the December Statistics Canada report), the spot market currently appears to be more of a buyers’ market and prices on the lower end will persist through December.  The November acreage estimate for 2014 mustard in Canada was 465,000 acres and the yield was 1,054 lb/acre.  The December report increased the acres by 35,000 (7%) but the yield estimate went down to 873 lbs/acre (17% decrease).  Export estimates for 2015 were also decreased in December and the net result from the November report is virtually zero.  The stocks/use ratio at 31-July-2015 remains at 14% and my experience supports that when we have been near 10% (one month supply) in past years prices do not retreat.  I believe the yield estimate was too high in November.  I now have suspicions as to why the acres estimate went higher in December: it seems that no one wants to create a big ripple by making a significant adjustment if they are not confident what mustard production was in 2014.

2014 crop quality is very good and not that much different from previous years ( over 95% is No.1 quality). Olds Products is very pleased with the quality of mustard that is being produced by the 50 plus contract growers spread out over Alberta, Saskatchewan, North Dakota and Montana.

We plan to present our growers the 2015 contract prices in January and our requirement for acres will be very similar to 2014.  The currency exchange will have greater impact for the US mustard grower market (CDN $ currently 13% lower than USD) but to remain competitive for USA mustard growers some adjustments will have to be made.

Please let me know if you have any questions or comments.

Thank you.

 

Regards,

Walter

 

October 17, 2014

I last reported on 12 August and the outlook on that date for the mustard crops was quite different with the outlook/reality today.  At that time I reported very little/no major storms (hail) had affected the Olds contracted acres and harvest was just a few weeks away.  Two major hail storms affected our contracted areas: one on 8 August in Alberta that reduced yields 50% for approximately 2,500 acres, the other on 3 September in North Dakota/Montana that affected as many acres but with even less prospect for yield.   Hail in September is very rare and can be the cruelest since the plant is so close to harvest and the pods are more susceptible to shelling from hail.  

The other major news story after my last report was the wet and cold weather through parts of August and September.  Some growers reported it was one of the most difficult harvests in 25 years (i.e.  heavy rains caused fields to be inaccessible for harvest for longer periods).  The mustard harvest finally wrapped up in the last few weeks and harvest samples have been arriving at the Olds office for analysis.  Quality looks good but some rime damage (white color) is noticeable but not a large concern.  The last year where rime damage was noticeable was in 2010 when cold and wet weather near harvest affected the crop.  Rime is caused by a cool temperature prior to maturity that causes the mucilage in the hull to emerge.  

Spot prices have dropped in the last three weeks due to an increase in mustard acres for 2014 (100,000 more than 2013).  The entire 2014 acreage increase are spot acres that either could not get a contract or were a reaction to better price comparison they saw back in March/April when canola and wheat prices were dropping.  Recent price bids from some other industry buyers have been lower due to the lack of additional demand from export markets.  The consistent demand for mustard export in 2015 is 125,000 MT-140,000 MT and most of this is covered by growers with contracted mustard.

Olds Products started pick up of the 2014 crop in September and we look forward to good movement through the delivery period.  After most harvest samples are received I will be better able to discuss the pickup of your crop.  

A remaining question regarding the 2014 mustard crop is the whether the average yield can hold up to earlier predictions.  Saskatchewan Ag and Statistics Canada are both projecting very close to 20 bu/acre (1000 lbs.) for a mustard (yellow, brown and oriental) average and that would be very close to last years near record average yield.  I do not believe it will be as high (probably closer to 800 lbs.) but even if it is we are still not looking at an industry inventory carry-forward position that could not be bought in the market in the next 8-12 months.   Here are the fundamentals:

  • 2014 average yield at 20/bu acre (high side) will only produce an additional 3-4 month supply after Aug 1/15 or approx.  15% stocks to use ratio
  • 2015 mustard market will need a minimum of 400,000 acres to meet the normal demand in 2016.  
  • Canola free land (no canola grown in the previous 3-4 years to avoid contamination) will be difficult to find outside of the core mustard acres (200,000-250,000 acres)

2015 new crop mustard prices will be most dependent on the prices of other commodities that compete for the acres.   I hope to have our 2015 contract prices to the Olds Products past growers in January but please let me know the potential you each have for mustard acres in 2015.  Thanks.

 

Regards,

Walter

 

August 12, 2014

Mustard crops in all growing areas are progressing well and the prospect for an above average yield is very promising in Alberta, Saskatchewan, North Dakota and Montana. After the cool and late start to the growing season the mustard crop has received warm and dry conditions( since the “big rains” of late June) but also combined with some timely showers in July that have helped the pods fill. Another factor helping above average yield potential has been fewer hail incidents in 2014. 

The mustard harvest should start in most areas in the next few weeks and today I mailed a harvest sample bag to each Olds contract grower. Please fill the bag as best you can as we will send part of your sample to the CGC for quality testing (includes protein and oil). The CGC uses this information to compare the 2014 crop to previous years.

I completed my crop tour/inspection of the Olds Products contracted mustard acres on July 31 and I was very pleased with what I saw. I did not see as many super tall plants this year and I also saw more stems per plant along with more filled pods. One explanation for this could be the July temperatures saw far fewer “hot days” (above 30C or 90F) than the previous five years and cooler evenings/mornings as well- exactly what mustard responds favorably to. The mustard fields appear much cleaner as a whole this year due to the better application of herbicides and the even growth (fewer patches in low areas where only weeds were growing in previous years after heavy early season rains) of the mustard. Due to the wet conditions in May approximately 10% of our contracted acres (all in North Dakota) were not able to seed and this is also below the average of the previous two years.          

Spot prices for yellow have dropped slightly in the last two weeks after testing levels in July. There will likely be a bit of a drop again after harvest begins and when nearby demand is met with deliveries of the 2014 contracted mustard. The long term fundamentals for 2014/15 mustard are strong even with the increase in seeded mustard acres in 2014. There is no question mustard acres were lost this year in Eastern Saskatchewan and Western Manitoba due to the heavy rains that drowned out mustard there. After Canada, the next largest mustard exporter is the Ukraine and at this time not much is known of their harvested mustard quantity or quality. We may have to wait until October to see if/what additional demand develops for Canadian yellow mustard ex Western Europe.

I expect to have virtually all of the 2013 crop picked up by the end of August from Olds contracted growers. Our current inventory level of bin run mustard is on the high side but also expected after the above average yields in 2013. After we receive and analyze the harvest samples I will contact the Olds contract growers and provide some shipping guidance.

Thank you.

Regards,

Walter

 

June 30, 2014

Excessive wet field conditions have been the case in Southern Alberta, Saskatchewan, North Dakota and Montana in the last week. 5 to 8 inches fell in Southern Alberta over a 3 day period starting just over a week ago is a good example of what is happening in other growing areas as well.  Despite the large rain fall amount in places it was welcomed by most growers due to the drier conditions that existed prior in southern areas of Saskatchewan and Alberta. 

Mustard growers in Saskatchewan finally finished up the last of the seeding in mid-June (cool weather) and overall the seeding dates averaged 2-3 weeks behind normal and that means the mustard may have to endure July heat during the flowering period.  Mustard is not a big fan of extreme heat especially during the blooming stage when petals are blasted to ensure the plant can survive.  Mustard has a very effective tap root that can go lower than most other crops in search of moisture and this can save a 10-20 bu crop but comes up short when the prospects are 20-30 bu/acre and the sustained temperature is 35 plus celcius (95 F).

Overall, despite the later seeded crop and given the increase in mustard acres in Canada from 2013 (approx. 25 % or 100,000 acres), the prospects for at least an average crop yield are good.  Spot prices remain strong for both yellow and brown.

Mustard acres in the USA will be down again this year (20% lower or 10,000 acres) due to the cheaper CDN dollar and the acres lost to drown out in North Dakota.

Mustard shipping from Olds contract growers will hopefully be brisk in July and August as we aim to clean out the 2013 crop (contracted and overage).

Regards,

Walter

May 9, 2014

Spring is here but it is doing a good job of barely showing its warm face thus far. Cold and wet (snow last Tuesday) weather has been the theme across the mustard growing areas of Alberta, Saskatchewan, Montana and North Dakota. At this time only 15% is seeded (very close to long term averages for mustard) but the outlook for warmer drier weather in the next week is encouraging. 

Spot prices continue to hold firm for yellow and brown mustard . Prices will hold firm until more is known about the number of acres seeded to mustard in 2014 (Ag Canada surprised all with an estimate of just 360,000 acres) and the progression of the crop during the growing season. The 2013 mustard crop production will have very few stocks remaining on farm at 31-Aug-2014 in Canada and USA. Inventory with some buyers and processors will still have 3-4 months supply for their requirements at 31-Aug-2014.

Statistics Canada has forecast (based on annual March phone survey) new crop acres seeded to mustard to be at 460,000 acres (365,000 acres-2013). At this level and with normal yields the 2014 production will not take mustard out of the comparatively  low farm inventory position at the end of the crop year (July 2015).  This all supports continued strong contract pricing going forward.  In the USA (Idaho, Washington, Oregon, Montana and North Dakota) the mustard acres are not expected to break through 50,000 acres once again. Crop insurance requires the grower in the USA to have their mustard production under  contract and this eliminates the speculative side of production there. Canada, on the other hand, has approximately half the mustard acres grown most years without a contract.

Canadian mustard exports  are higher this crop year due to higher yellow spot sales to Europe of 10,000 MT in the winter months due to low production in the Ukraine (2nd largest exporter after Canada) last year. Yellow mustard acres there are expected to be higher this year due to low stocks (higher prices) and poor financing options for crops with higher input costs.

Please let me know if you have any questions or comments.

Walter

March 13, 2014

Olds Products 2014 mustard contracting with growers in Alberta, Saskatchewan, Montana and North Dakota finished very quickly this year due to increased interest caused by low expected carry forward inventory at 1-Aug-2014 in Canada of only 12,000 MT (on farm) - only one month supply of normal exports.  On farm inventory of mustard in the USA will be very close to zero at the same time.  Other commodities face much higher farm inventory levels and as a result the expected new crop acres for mustard will increase by 25-40% (with normal yields the added acres - mostly yellow - will assist to meet annual demand) in Canada for 2014 to over 450,000 acres.  Mustard acres have been trending down over the last 5 years and the increase is an interesting rebound.  I expect mustard acres to remain the same in the USA (50,000) due to the weaker CDN$ (10% lower from 1 year ago).

In February I attended the 38th annual meeting of the Canadian Mustard Association and received updates on new varieties of mustard that are being tested and may come up for registration in future years.  A European  buyer at the meeting reported that due to low yellow stocks in the Ukraine (poor crop in 2013) there was increased demand for Canadian yellow mustard (based on YTD export numbers - up approx. 10,000 MT from year earlier) from October 2013 to present.  Ukraine and Russia are expected to also largely increase their mustard acres in 2014 for much the same reason as growers in Canada - low mustard stocks and better relative recent prices. Ukraine is the largest supplier of yellow mustard to Western Europe (mainly Germany) over the last five years.

It should be noted that although mustard inventories (12,000 MT) as reported by Statistics Canada are expected to be very low at the end of the 2013 crop year, inventory levels with some buyers/customers may be significantly higher from a year earlier due to increased shipments to cleaning/storage facilities in the USA. All mustard shipments to USA ex Canada are included in the export number regardless if they are sent immediately for end use processing or if they are first stop for cleaning and storage (i.e. Olds Products cleans in North Dakota).  As I reported a year ago the inventory of mustard at the Olds Products storage facility at 01-Aug-2013 was very low due to below average (much) contract yields in 2012.   In 2013 the average mustard contract yield for Olds Products was almost double that of 2012 and as a result Olds Products will have a high mustard inventory level at 1-Aug-2014 – this includes the non contract portion from contract growers. 

Please let me know if you have any questions or comments. Thank you.

Regards,

Walter

January 10,2014

The world grain and oilseeds markets are weighed down by current large inventories due to record production in most producing areas in 2013. Saskatchewan is a good example- it produced 38 million MT of total crop production and this is 40% higher than the previous year and close to 50% above the 10 year average. The effect has spilled into spot mustard prices (down from previous year) as some growers look to see what can be priced, moved and converted to cash in the short term. Bids are down largely due to obligations to move contracted mustard leaving little storage space to buy spot mustard but its time will come in Spring/Summer of 2014 due to the low overall stocks of mustard in Canada/USA. This low overall  stock level is keeping spot price bids from falling even more and once 2014 contract prices are set they should move higher. In the next few weeks Olds Products will (1- 2 weeks)set a contract price for the 2014 season based on using certified seed. Our requirement for acres is very much the same as the previous year and we will strive to sign up our past growers first. Bart and Peter Hribar will be our exclusive contracting team for the sixth straight year.

Demand for mustard grown in Canada/USA remains strong and movement off farm for Olds Products thus far in the current crop year has been very good. We will keep it going.

Over the next 2-3 months Olds Products will contract 2014 mustard production and the values needed to contract acres depend on:

  • the future opportunity cost of growing another grain, oilseed or specialty crop (see below)
  • available acres for mustard in Canada/USA that are not contaminated by canola –Canada/USA would be hard pressed to seed more than 450,000 acres on “canola clean” land.
  • carryforward balance from 2013 production –two to three months supply from 1-Aug-2014 (very low historically)
  • past average yields for mustard-highly variable
  • currency exchange- much weaker CDN dollar (3 year low @.92) makes pricing in Canada more competitive

Opportunity Cost

Canola and wheat cash prices have lost (20% and 30% respectively)  from a year earlier and 2014 does not offer much hope for recovery in the near term (6 months) given the prospects for the soybean harvest in South America. However futures prices offer storage premiums to nearby prices and this may be the popular option for canola growers.  Where does the contract price mustard have to be to be competitive for the mustard grower and the end user in 2014/15? I welcome your replies.

Bullets

  • Low acres in 2012 and 2013 resulting in very low carryforward at Aug 01, 2014 (couple months supply)

  • Yields in 2013 were 3rd highest in over 30 years

  • 2014 acres projected to be 420,000 acres in Canada (25% increase)

  • Based on historical average yields the projected 2014 acres are needed to meet demand

  • Demand for Canada/USA mustard is approx. 11,000 MT/month (131,000 MT year- approx.  90% ex Canada)

Regards,

Walter