August 2, 2019

Market Developments

  • The condition of the Saskatchewan mustard crop has been improving, but still trails the average level by a wide margin. As of July 15, 35% of the crop was rated good or excellent, compared to two weeks prior at 24%. This also lifts the 2019 ratings above both 2015 and 2017 and the trend looks set to overtake 2018 ratings as well. In Alberta, only 31% of the mustard crop was rated good/exc as of July 16, a very slight improvement from the beginning of the season and far below the 10-year average of 69%.
  • When we look at the past few years, we see a fairly strong connection between crop ratings and final yields. The outcomes also reinforce our idea that if crop ratings are improving later in the season (like they are this year), the actual yield ends up higher than the absolute number would suggest. For example, the crop ratings for 2015 were the second lowest but because ratings had been improving in the second half of the season, the yield actually came in higher than might be expected. Meanwhile in 2017 and 2018, crop ratings were descending during the year and yields ended up toward the bottom end of recent history.
  • For 2019, the ratings are still low but are rising, similar to 2015, which suggests a solid yield is still possible. As a result, we’re leaving our yield forecast at 820 lb/acre, 5% off the 5-year average. This would put the 2019 crop at 144,000 tonnes, 30,000 tonnes less than last year.
  • Based on a 5% below-average yield for each mustard class and StatsCan’s split of mustard acreage by type, yellow mustard production would drop 23%, hitting only 60,000 tonnes, the smallest total since 2011/12. Oriental mustard production would drop nearly as much, down 22% and would achieve only 24,000 tonnes. Meanwhile, brown mustard production would only slip 8% from last year and would be nearly as large as the yellow mustard portion. While we still have some doubts about the drop in yellow mustard acreage, it suggests the most market support for that type of mustard.
  • Prices for white (yellow) mustard in Ukraine have been edging lower through the summer months. This decline is relatively minor however as anecdotal reports suggest Black Sea mustard production won’t likely match last year’s high. Even with this dip in the first half of 2019, mustard prices remain close to the multiyear highs.
  • For the most part, there appears to be some underlying strength in mustard markets with few signs of seasonal weakness. Yellow mustard continues to hold a premium position over the other classes and if the StatsCan acreage split is any indication, yellow will remain the strongest performer in 2019/20. Meanwhile, there are some modest gains seen in the average brown mustard new-crop bid and old-crop is remaining solid as well. Oriental mustard bids continue to lag the other classes and actually appeared to be losing a little ground lately.

Outlook

Mustard bids are holding steady and avoiding seasonal weakness. While there’s not a lot of trade going on, farmers’ reluctance to sell will keep bids from slipping much lower as harvest approaches. Beyond that, we expect the smaller 2019 crop to provide some market support but a runaway rally isn’t in the cards either, as there are sizable unreported on-farm stocks that will become available as bids move higher.