In the statement, they said they were “concerned about the increasing use of protectionist non-tariff trade measures, inconsistently with WTO rules.”

The ministers from countries including the U.S., Canada and China, in Buenos Aires for the G20 meeting of agriculture ministers, said in the statement they had affirmed their commitment not to adopt “unnecessary obstacles” to trade, and affirmed their rights and obligations under WTO agreements.

The meeting came amid rising trade tensions that have rocked agricultural markets. China and other top U.S. trade partners have placed retaliatory tariffs on American farmers after the Trump administration put duties on Chinese goods as well as steel and aluminum from the European Union, Canada and Mexico.

U.S. growers are expected to take an estimated $11 billion hit due to China’s retaliatory tariffs (all figures US$). Last week, the Trump administration said it would pay up to $12 billion to help farmers weather the trade war.

U.S. Agriculture Secretary Sonny Perdue told Reuters in an interview on the sidelines of the meeting that Trump’s plan would include between $7 billion and $8 billion in direct cash relief that U.S. farmers could see as early as late September.

Despite the payments, the measures are “not going to make farmers whole,” Perdue said.

Citing the Trump administration’s relief measures, German Agriculture Minister Julia Kloeckner said farmers “don’t need aid, (they) need trade.”

“We had a very frank discussion about the fact that we don’t want unilateral protectionist measures,” Kloeckner said in a news conference after the meeting.

The ministers, whose countries represent 60 per cent of the world’s agricultural land and 80 per cent of food and agricultural commodities trade, did not specify which measures they were referring to in the statement. Asked for details, Kloeckner said the ministers did not want to “criticize a single country.”

“We all know what happens if a single person or country doesn’t adhere to WTO rules, trying to get a benefit for themselves through protectionism,” she said. “This will usually lead to retaliatory tariffs.”

In the statement, the ministers said they agreed to continue reforming the WTO’s agricultural trade rules.

“Independent of all the news there was surrounding (the meeting), we managed to reach a unanimous consensus,” Argentine Agriculture Minister Luis Miguel Etchevehere said.

U.S. President Donald Trump and European Commission President Jean-Claude Juncker struck a surprise deal on Wednesday that ended the risk of further escalating trade tensions between the two powers.

After the meeting, Trump said the European Union would buy “a lot” of U.S. soybeans.

Earlier, Kloeckner told Reuters that the trade relationship between the U.S. and the European Union was improving, but that there was no guarantee the bloc would import the quantity of soybeans that Washington expects.

–– Reporting for Reuters by Scott Squires and Luc Cohen.

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Cocoa, cotton, sugar and frozen concentrated orange juice on ICE Futures U.S. were on track to be the only gainers this year in the 19-component Thomson Reuters Core Commodity Index .

The index was down by a quarter over the year. This month it hit its lowest level since 2002 as commodities ranging from iron ore to oil took a battering on concerns over excess supply.

Soft commodities were among the few bright spots.

Dry weather in West Africa, where 70 per cent of the world’s cocoa is grown, is expected to hamper the upcoming cocoa crop.

A below-average monsoon is likely to harm sugar and cotton crops in South Asia, while autumn rains in the U.S. Southeast, where farmers had already slashed cotton acreage due to low prices, widely damaged crop quality.

Global orange juice production in the 2014-15 crop year was just 1.7 million tonnes, its lowest level since 1987-88, due to greening that hurts yields.

“Soft commodities, bar coffee, have all been presented with much better fundamentals… at a time of worries about supply,” said Ole Hansen, head of commodity strategy at Saxo Bank.

“El Nino should keep these commodities supported into 2016, and coffee has the potential of playing catch-up.”

Raw sugar ends the year on a sweet note after rebounding more than 50 per cent off a seven-year low hit in August as analysts expect the market’s first supply deficit in six years to emerge.

In the year when the index sank by a quarter, even a small loss was considered a relatively robust performance.

“You have to have really exceptional fundamental arguments to be able to fight the negative macro tide,” said Michael McDougall, director of commodities at Societe Generale in New York, referring to pressure from the stronger U.S. dollar and slowing growth in China, the top consumer of many raw materials.

To be sure, the so-called soft commodity markets are tiny and some of the most volatile, compared with oil, aluminum and corn.

Open interest in cocoa, cotton, orange juice and sugar combined is around $28 billion, or $10 billion less than that of aluminum alone and just two-fifths that of Brent crude (all figures US$). Open interest, which refers to the total number of outstanding contracts that have not been settled, can indicate the intensity of trading in a particular market.

On average in 2015, just over 200,000 lots of cocoa, cotton, orange juice and sugar combined traded hands each day, compared with nearly 700,000 lots in Brent crude daily.

Still, speculative interest perked up toward the end of the year. Earlier in December, hedge funds and other speculators had their biggest bullish bets in cocoa in more than a year. In sugar, they built up a record net long position in November.

Other, more heavily traded commodities were harmed by large outflows of capital from the commodities space. Softs did not have as much exposure in the first place.

“Soft commodities are not that well-represented in the big commodity funds, which has also helped cushion them from the continued exodus of institutional investors,” Hansen said.

— Luc Cohen is a commodities correspondent for Reuters in New York.

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Prices of the yellow condiment dabbed on hot dogs and pretzels have leaped to their highest level in seven years this autumn as growers in Western Canada, which supplies three-quarters of the world’s traded mustard seed, turn in their smallest crop in nine years.

In India, the price of a contract representing both mustard seed and rapeseed, related crops grown in the same areas, has surged by a fifth to record highs in the past three weeks over fears that unseasonably hot weather will prevent sowing that would normally begin later this month.

The higher prices threaten to drive up costs for Kraft Heinz, maker of Grey Poupon, and Reckitt Benckiser Group, maker of French’s, which hold more than 40 per cent of the market share for North America’s fourth-favourite condiment by sales, according to some estimates.

But smaller producers such as Barhyte Specialty Foods are feeling the most immediate pinch. The company at Pendleton, Ore., about 300 km south of Spokane, lost customers after raising its price on organic brands to cover the cost of buying extra supplies from Canada.

“We took a big spike this year,” said CEO Chris Barhyte, whose company makes private label mustard as well as its own Suzie’s brand. Although the bulk of his mustard seed comes from domestic farmers, he increased purchases from Canada to meet heightened demand for organic products that now make up roughly 40 per cent of his overall needs. Prices for Canadian organic seed were nearly 30 per cent higher than in past years, he said.

While farmers savour rising prices and food makers bemoan higher costs, those hurting most may be the middlemen who buy crops from farmers on the spot market to meet forward sales.

Some exporters are “panic buying” due to scarcity, said Bob Waldbauer, director of mustard seed sales at BroadGrain Commodities at Dafoe, Sask., about 150 km east of Saskatoon. “It’s not a matter of price, it’s a matter of supply.”

He declined to name any specific firms. The biggest exporter to the U.S. is Viterra, the Canadian grains trader owned by Swiss mining and trading firm Glencore, according to data from PIERS. Company representatives did not respond to requests for comment.

To be sure, ructions in the niche mustard market barely register amid the meltdown engulfing far larger commodities.

U.S. imports of mustard seed came to just US$52 million last year, almost all of that from Canada, and the entire U.S. retail market is worth about US$430 million, according to Euromonitor. Consumers may barely notice, as seeds make up only 15 per cent of the average retail price for a bottle of mustard, said Walter Dyck, seed division manager at Wisconsin-based mustard manufacturer Olds Products Co.

The crop is a mere blip on Canada’s Prairies, where farmers planted 75 times more wheat than mustard this year.

Blame Canada

The problem emanates from Canada, where farmers sowed only 325,000 acres of mustard this year, less than half the 2003 record high. It has fallen out of favour with many farmers for relatively lower returns.

In addition, dry weather cut yields, producing only 109,300 tonnes of mustard this year, down 45 per cent from last year’s output, according to Statistics Canada.

Processors have recently paid farmers C45-50 cents per pound for yellow mustard seed on the spot market, where they are likely to source about half their supplies this year, Dyck said.

“It’s really, really tight.”

The impact is felt most keenly in the U.S., where local production covers barely a tenth of domestic demand. The rest is imported from Canada, with shipments up 15 per cent this year, according to U.S. International Trade Commission data.

Big, diversified food companies have been partly protected from this year’s rise, thanks to extensive advance purchases, but next year may be a different story, as high spot prices influence a new set of supply contracts.

“Clearly when the price goes up, things change. Demand and price go hand in hand,” said Elliott Penner, president of French’s, which commands 30 per cent market share with sales of US$132 million, according to Euromonitor. “It’s competitive as hell.”

Kraft Heinz’s Grey Poupon, which is second in the market with 11.5 per cent, is also competing for more seeds, and launched a strategy this year to boost mustard sales. Kraft Heinz declined to comment.

ConAgra Foods, whose Gulden’s brand is third at six per cent, said it had not experienced any disruption in production.

Wasabi woes

Beyond North America, the mustard squeeze is being felt in India, where a futures contract on the local NCDEX exchange tracks both rapeseed and mustard seed. The two crops are similar, although not usually interchangeable.

Prices have surged over 20 per cent in the past month and hit a record high at 5,120 Indian rupees (C$103) per 100 kg earlier this week due to unseasonably high temperatures.

The woes may touch budget-conscious sushi lovers who could pay a fraction more for their spicy green condiment. True wasabi is a rare and expensive plant, so producers often opt to make a substitute with a mixture of horseradish and so-called oriental mustard, which is in even shorter supply than the standard variety.

Richard Marleau, who grows mustard near Aneroid, Sask., about 100 km south of Swift Current, is in no hurry to sell his crop as prices climb.

“It’s nice to see prices rise finally so a guy can get rewarded for what he does,” Marleau said. But processors’ current bids for next year’s output may not cut the mustard against lofty prices of lentils and other niche crops, making it doubtful that bigger plantings will replenish supplies.

“They’re going to be in the same situation,” he said.

— Rod Nickel and Luc Cohen report for Reuters from Winnipeg and New York City respectively. Additional reporting for Reuters by Rajendra Jadhav in Mumbai.

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In the biggest deal to roil the cocoa trade in recent years, Olam scooped up a larger rival’s business and catapulted into the top league of cocoa merchants and processors behind Barry Callebaut and Cargill.

For Olam, the reasons are clear: its vast bean sourcing operations stretching from Ivory Coast to Indonesia will feed newly acquired bean processing assets.

This gives it more control over prices of beans, the butter that gives chocolate a melt-in-the-mouth taste and the powder that goes into cookies and drinks such as hot cocoa.

For merchants and processors who buy beans from Olam in an already tight-knit market, the reshuffling of the pack is unsettling as it removes a major supplier from the market.

Olam buys around 500,000 tonnes of cocoa annually, and it said it will increase its processing capacity to more than 700,000 tonnes, or 16 percent of world supply, with this deal.

They worry that a big portion will likely go to feed its newly acquired eight processing plants that produce powder, butter and liquor as it becomes a net buyer in the four-million-tonne market.

It could create opportunities for new dealers to fill the void left by the Singapore-based commodity trade house.

But the additional buying could add strain to prices.

This could force users supplied by Olam, including chocolate manufacturers like Mars and Nestle and processors such as Blommer, to look elsewhere for many of their beans.

“It puts the grinders in a sticky situation as they will have to buy larger quantities from smaller firms, thereby increasing their risk,” said John Palabrica, president of MJMB LLC, a private commodity trading company in Newark, Delaware, a supplier of ADM.

Still, the deal brings uncertainty to merchants such as MJMB, suppliers of beans to ADM’s processors, which will become part of what traders said would likely be a more self-sufficient operation, Palabrica said.

Other industry sources noted Olam does not source enough beans to depend solely on its own supply.

“I don’t see Olam walking into that business and saying every supplier from ADM is no longer wanted. They will need much more cocoa than they used to,” a European industry source said.

Opportunity knocks

Wooing ADM was an opportunity Olam could not miss, but convincing its executives who had only recently decided to hold onto the business, which had turned into profitable after a round of cost cutting, took some doing, according to Gerald Manley, Olam’s managing director and global head of cocoa.

ADM sold its chocolate business to Cargill, which had also been interested in its cocoa processing operations, in September.

The deal underscores the bullish outlook for cocoa, with more market participants moving downstream.

Some say it is a risky business with margins often squeezed by volatile bean prices and competition increasing on a boon in capacity in Asia.

The deal is the latest in a consolidation spree that has seen volatile prices squeeze margins for dealers, raising questions about the viability of a cocoa trading business lacking any downstream processing or production assets.

“On a combined business, we can even out the volatility,” said A. Shekar, Olam executive director in finance and business development.

The merger widens the gap between these top three processors and the rest of the market. Dealers said such consolidation could reduce price transparency, but were pleased to see the business fall into Olam’s hands rather than Cargill.

The Minnesota-based trade house is already a major player in cocoa processing — and traders feared acquiring ADM’s business would have made it too big.

ADM’s global cocoa business includes a processing facility at Mississauga, Ont., plus two in the Netherlands and one each in Germany, Brazil, Cote d’Ivoire, Ghana and Singapore.

Most of about 1,550 employees in ADM’s cocoa business are to transfer to Olam with the sale, which is expected to close in the second quarter of 2015.

Olam has been open about its bullish forecasts for the cocoa market, projecting a global deficit of more than 120,000 tonnes in the 2014-15 crop year, despite surplus projections from Barry Callebaut and softs broker JSG Commodities.

It repeated those expectations in a briefing on Tuesday, arguing that growing emerging market demand for chocolate would necessitate additional grinding and pressing capacity, despite concerns about over-capacity as some bean processors have cut back on grinding amid high stocks of butter powder.

— Reporting for Reuters by Luc Cohen and Marcy Nicholson in New York. Includes files from AGCanada.com Network staff.

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