Market Insight: Mustard stocks seen tight

Statistics Canada reported new crop mustard acres at 490,000, only 55,000 acres
above last year and well below what the market requires for the coming year.

Carry-in
stocks are at pipeline levels; a situation likely to repeat itself this year given the
inadequate acreage growth. The market will need above average yields to keep prices
from spiraling out of control, which is uncertain at best given that mustard yields tend
to vary considerably from one year to the next. Prices appear poised to move higher

later in the year after processors and other local buyers have worked through their
contracted off-combine deliveries.

Mustard seed is used primarily in condiments,
meaning that demand is highly inelastic, making it difficult for high prices to curtail
usage.

Presently Canada is the dominant player in satisfying world demand for all three
classes of mustard, with the U.S. and E.U. consuming over 90 per cent of our exports.

However, lately we have seen expanding production in both Russia and the Ukraine,
which has the potential to reduce Canada’s influence on prices, especially to
European destinations. Heading into 2009 and 2010 we would expect prices to work
lower based on the ability of producers in these regions to respond to tight supplies.

Although the fundamentals look bullish for the coming crop year, it’s worth noting
that the situation in a market this overpriced can correct very quickly, particularly
when the amount and quality of market data and information for this crop is relatively
thin.

– The FarmLink Market Insight was researched and produced by FarmLink Marketing Solutions, a marketing advisory service for Prairie farmers, and is published here with permission of the authors.

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