A tug of war between North American (NA) pre-harvest and post-harvest spot prices is occurring again this year as it does every year while the mustard crop continues to develop. Statistics Canada and USDA released their most recent acreage and yield estimates last week and the news was absorbed in the spot market along with many variables that play a role in the tug of war. For example, if new crop acres and expected yield are lower than average, or what is needed, then spot prices will either remain strong or go higher. When you combine this with a low carryout from the previous year you have the potential for even stronger spot prices.
Currently the consensus is the 2023 acres seeded in both Canada and the USA were more than sufficient (up 10% from 2022) and that has kept new crop spot bids lower than pre-harvest bids despite recent deteriorating conditions caused by the lack of rain in most of the mustard growing areas of Canada and a few in the USA. If rain does not come soon and severe heat continues on the parched fields, we can expect new crop spot bids to increase in July. Many fields in the western part of Alberta (approx. 4% of total NA mustard acres) are now at the point of being written off by crop insurance. Mustard crops elsewhere in Canada that were rated good a few weeks ago are now largely rated just fair.
I believe the 2022 mustard carryout in North American is virtually sold out at the grower level. End users who process the mustard into wet or dry form appear to be covered through October 2023 at which time they become 100% reliant on new crop.
Another contributing factor to the North American spot price is the potential supply from Russia and Ukraine. Both countries received news of the high spot prices in North America and increased their mustard acres this year to potentially accommodate a portion of their yellow mustard exports for North America. Growing conditions and progress to date is good. Harvest is normally a few weeks earlier than North America.
In addition to the spot mustard market in North America, which has received a great amount of attention since 2021, there is of course the grower contract market to which Olds Products directs 100% if its annual requirements. This contract market starts around January every year and continues through March. Although the spot market can provide some assurance when supplies are short Olds Products believes it is best to lock in a fair price and production with growers that choose to commit early. It is worth noting that growers choosing to grow without a contract make up almost half the total growers in Saskatchewan which is the largest mustard producing province in Canada. Mustard growers elsewhere (Alberta and USA) are largely contract growers.
Much of the mustard in North America was seeded in early May this year and crops now are now nearing the end of the blooming period which normally lasts 3-4 weeks. With the expected hot and dry conditions in the forecast for July and August it will be an earlier than normal harvest.
The Seed Division of Olds Products is planning a crop tour starting the 17-July in Alberta and then moving to Saskatchewan later in the week. There is a research tour on 20-July that we will also will attend in Swift Current. The USA mustard fields will be visited the following week. We look forward to possibly meeting with you.