February 8, 2019

Market Developments

  • StatsCan has started to report Dec 31 mustard stocks again after an absence since 2013. StatsCan pegged the mustard stocks at 159,000 tonnes, which compares to the 2009-13 5-year average of 176,000 tonnes. For mustard (as with several other crops), we’re a little skeptical that supplies are really that low, but at least it’s a starting point.
  • In contrast with our projected 26% decline in 2019 mustard acreage, Ag Canada is forecasting seeded area to remain steady, a little over 500,000 acres. Keep in mind that this Ag Canada estimate is not survey-based but is the viewpoint of its analyst. The results of the farmers’ seeding intentions survey will come out from StatsCan on April 24.
  • It’s still a long way away, with a lot of assumptions and uncertainty in the outlook, but there is potential for 2019/20 mustard ending stocks to end up on the tightish side. As a reminder, our forecast of 2019 seeded area is 375,000 acres, down 26% from last year’s high. Using the 5-year average yield would trim 32,000 tonnes from last year’s production total and even with an increase in the carryover from 2018/19, supplies in 2019/20 would decline by 20-25,000 tonnes. If we leave domestic usage and exports roughly steady, ending stocks could dip toward 40,000 tonnes, close to the low end of recent years.
  • A longer look back at mustard exports out of the Black Sea region shows that volumes in the early 2000’s were even larger than the past few years. That said, the makeup of the export origins is shifting. Ukraine had accounted for a much larger share of the total in earlier years while Russia was a smaller player. In the past three years, Russia has become more dominant while Ukraine has faded to a smaller share of the total. And in the past couple of years, Kazakhstan is starting to emerge and will likely outperform Ukraine by the end of 2018/19.
  • Canadian mustard bids continue to diverge, with more strength in yellow mustard due to somewhat tighter supplies. Meanwhile, average bids for brown and oriental mustard turned lower again, hitting multiyear lows.
  • New-crop bids are still fairly sparse, and the lack of a large sample can cause the sharp price moves seen in the chart. The average new-crop bid for yellow is around $35 per cwt, although some unofficial bids are a couple of dollars lower. It appears there’s a little more interest in encouraging oriental mustard planting, with the average new-crop bid now higher than spot prices.

Outlook

While we thought mustard bids had found their lows a few weeks ago, brown and oriental have dipped again. This is due to weak demand for Canadian product caused by increased competition from Black Sea mustard. Steadier demand for yellow mustard along with reluctant farmer selling could give those prices a bit more lift yet later in 2018/19 while brown and oriental will likely see only a modest rebound from current levels.