A pickup in export demand and a tightening supply outlook have resulted in some improvement in values paid for yellow mustard in Western Canada -- but prices will need to increase substantially if end-users want farmers to consider growing the crop next spring.
"We've seen a small jump in the bids for yellow mustard as of late to reflect the absence of supply and a pick up in export demand," said Baine Fritzler, vice-president of the Saskatchewan Mustard Development Commission. However, now that companies have got what they need, values were likely to level off for a bit.
Prairie Ag Hotwire data shows that cash bids for yellow mustard, delivered to the elevator have hit the 38.5- to 39-cent per pound range. At the same time a month ago, yellow bids were in the 35- to 37-cent range.
"I heard some bids for yellow mustard hitting 38 cents a month ago but they got to 40 cents as the need to cover end-user commitments increased," Fritzler said.
While demand has facilitated the need to bolster bids for yellow mustard, he said the fact Statistics Canada keeps reducing the size of the mustard crop also bodes well for values.
"We've gone from mustard ending stocks sitting in the 80,000-tonne range to around the 50,000-tonne level, which is extremely small and just enough to make people nervous," Fritzler said.
He noted the government agency has reduced acreage to the crop as well as lowered yields significantly over the past couple of months.
End-users need to take note that in order to guarantee a supply base to work with next year, values for yellow mustard need to improve significantly from current levels.
Fritzler pointed out that with values for wheat in Western Canada rising fairly sharply as of late, it was likely some additional area to mustard could be lost next spring.
"To be honest with you, values for wheat have risen significantly and are competing with mustard on an even footing," he said, noting that previously mustard used to compete only with other oilseeds.
"You can book wheat for fall delivery at $8.25 a bushel, and if you take a 35-bushel an acre crop, the income looks very attractive to farmers," Fritzler said, adding that wheat is also a very easy and cheap crop to grow.
Yellow mustard would need to be in the 42- to 44-cents per pound range next spring in order to generate interest in planting some area to the crop, he said.
"End-users just don't seem to consider that if you don't encourage the producer, they will look for more financially attractive alternatives."
The days of a farmer growing yellow mustard for 35 cents a pound are long gone, he said.
"You have to figure that input costs of the crop have climbed to over $200 an acre, from $100 easily. Some of the end-users also seem to think that the cost to the farmer is the same as it was five to 10 years ago; that just is not the case."
Nitrogen values are up, diesel fuel is up, and the reality is that end-users need to pay up in order to guarantee supply, said Fritzler, who farms at Govan, Sask.
-- Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.