July 5, 2019

Market Developments

  • The good news is that the condition of the Saskatchewan mustard crop improved in the recent Sask Ag crop report. Of course, it couldn’t get any worse, given that two weeks earlier, 0% of the crop had been rated good/exc. The bad news is that as of June 17, still only 8% was rated good/exc compared to 46% last year and the 10-year average of 63% good/exc. The Alberta crop report also showed its mustard crop was in poor shape at 28% good/exc versus last year at 56% and the 10-year average of 70% good/exc.
  • Since that Sask Ag crop report, meaningful rains have fallen across nearly all of Saskatchewan with some of the heaviest amounts in the core mustard-growing region of the province. According to anecdotal reports, the crop in the region is already showing a noticeable recovery but it’s still much too early to know how much yields can rebound. It’s also worth noting that just across the border in Alberta, rainfall was minimal and the mustard crop there remains in serious jeopardy.
  • Based on anecdotal reports, we had thought mustard area might actually increase from the April intentions report but instead, StatsCan trimmed it further to 399,000 acres, 21% less than last year. Also surprising was that StatsCan showed a 24% decline in yellow area while brown mustard was down only 13%. If this is the case, it sets up a more bullish outlook for yellow mustard while brown could remain under pressure.
  • The impact of the weather on 2019 yields is still very unclear but the production scenarios we showed in a previous report can be fine-tuned somewhat. Even with a solid turnaround in the Saskatchewan crop, the average yield (856 lb/acre) is likely the most that can be expected. Our back-of-the-envelope calculation has the 2019 crop somewhere in the 140-150,000 tonne range, due to the combination of a large yield drag from Alberta and an average (at best) yield for Saskatchewan. This compares to our previous forecast of 160,000 tonnes and the 2018 crop of 170,000 tonnes. If our guesstimate is somewhere close to reality, it would mean 2019/20 mustard supplies (aside from the perennial underreporting of on-farm stocks) would drop much closer to expected usage, leaving less wiggle room and more supply risk.
  • Mustard bids have generally been quiet for a number of months but there are a few glimmers of movement. That’s more so the case for brown and oriental mustard which had been pressured lower by large old-crop supplies. In the last few weeks though, both brown and oriental old-crop bids have moved off the lows as supplies have started to dwindle and/or farmers are becoming more reluctant to sell. The expected decline in 2019 acreage for these two classes may also be playing a role in the stronger bids. Meanwhile, both old-crop and new-crop yellow mustard bids have been completely flat for several months as the situation between buyers and sellers is more balanced. Overall though, bids aren’t reflecting concerns by buyers about the condition of the 2019 mustard crop.

Outlook

There has been growing concern about the state of the Canadian mustard crop due to the dry conditions but buyers haven’t reacted yet. The latest rains may not have saved the entire yield potential but has certainly reduced the risk of an absolute disaster. We also haven’t seen any forecasts of Black Sea mustard yields, which could have taken a hit from the earlier heat. The worst case outlook for all three classes of mustard is steady with some potential to firm up, depending on Canadian crop outcomes.