Spot mustard market bid levels have moved higher since January due to continued stable export demand and poorer outlooks for supply in both the near term (up to 6 months) and long term (up to 16 months). In the near term farm inventories are expected to be virtually cleaned out for all mustard types by July 31. Dealer and processor inventories should hold up for another 4-5 months to November assuming there are no short positions. The long term does not look very positive for supply given my current view of lower-than-average-expected seeded mustard acres for 2021 and the widespread drier than normal conditions. Brown acres will be higher in 2021, but to me yellow acres in Canada look to be lower than 2020. Ag Canada is expected to have their projections out later this month and the USDA is forecasting another year of approximately 100,000 acres in the USA which is average over the past five years.
Contract prices for yellow are very near the all-time highs set in 2016 but it has resulted in a muted response from growers on both sides of the border. More growers shifted back to brown mustard in Saskatchewan given its more stable yield and the quick rise in the spot price since January. The move to brown mustard may be similar to the one in 2018 when more growers in Saskatchewan seeded brown mustard than yellow mustard. That is very rare given the much larger market for yellow. Despite the higher yellow mustard contract price, the prevailing view from many past mustard growers was that canola was a better choice when compared on a net return per acre and herbicide effectiveness.
Europe is the largest market for brown mustard and the majority comes from Canada. There is no second choice to match the quantity that Canada provides. On a per capita basis Germany consumes more mustard than any other country and that includes mainly the yellow type. The supply of yellow mustard for Germany and Western Europe is largely from Ukraine and Russia. Although current spot prices are stable, there is a view that mustard acres will be lower than needed in 2021. Apparently there are better opportunities for the dominant large corporate farms to grow other commodities. Canada and USA is the only real default if supply issues arise in the Ukraine and Russia.
Overall, the past winter was a mild one in Western Canada and the Northern Plain states. It consisted of one very cold spell in February and below average precipitation for most mustard growing areas. Some growers in Southern Alberta noted the fall and early winter moisture was soaked up nicely in the subsoil before the ground froze. There was a major storm recently but that was more north of the mustard growing areas in Saskatchewan. Mustard growers including those in Montana and North Dakota will be looking for moisture prior to seeding in order to germinate the seeds, and then, of course, more moisture to follow after seeding. At the time of writing this report there was a significant system of rain and snow in the northern plains of the USA close the Canada/USA border and that is a great relief for the growers in those areas.
Olds Products farm pick-ups of contracted yellow mustard have been heavy again in the past two months and will continue so through 31-July. We will have a slight pause in May as we will shift our pick-ups and bring in the balance of the contracted organic yellow mustard remaining on farm.
Please let me know if you have any questions or comments. Thank you.