Canada Markets

Fewer seeded acres of Canadian mustard combined with a yield slashed by the drought in the southern and central prairies has led to the smallest estimated production of mustard seen since 2008, or 11 years. Producers are estimated to have planted 163,900 acres of mustard on the prairies, down 22.8% from 2016 and below the five-year average of 167,500 acres.

Dry conditions on the prairies this summer led to a 35% year-over-year drop in yield to 676 pounds per acre as estimated by Statistics Canada, the lowest yield seen since 2007. As a result, Canada's production is estimated at 114,900 metric tons, down sharply from the 235,600 mt produced in 2016, below the 10-year average of 163,630 mt and the smallest estimated production seen since 2007.

Bloomberg ran a piece this week titled "Trouble for Mustard Lovers as Drought Curbs Seeds Used in Dijon." When the world's biggest exporter runs into problems, ripples can be expected to move quickly through the industry.

Latest producer bids reported by Saskatchewan Agriculture based on delivery to processing plants in the province shows brown mustard bid at $39.33 per hundredweight (cwt), up from a 2017 low of $33.33/cwt last reported in March. This is up 28.2% from the five-year average reported for this week.

Yellow mustard bids are reported to average $37.50/cwt, up from a 2017 low last reported in April, while up 5.5% from the five-year average. Oriental mustard is reported at $33.50/cwt, up from the 2017 low of $28.53/cwt last reported in April while 8.6% higher than the five-year average for this week. The September AAFC supply and demand tables point to an expected average price of $33.11/cwt to $34.47/cwt, although October estimates should be revised higher as they revise production lower based on Statistics Canada estimates. Statpub.com indicates bids for Jan/Feb/Mar only modestly higher than spot bids, a sign of weak carry and a bullish signal suggesting product is wanted now.

The one thing that may keep a lid on prices is the estimate for large stocks of 80,000 mt or 47% of use carried out of 2016/17, although stronger oilseed markets and continued dryness on the prairies could be the catalyst for higher prices to come. The question remains if this stock estimate is accurate and how easy or difficult it will be to pull this grain out of the bin.

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