WINNIPEG, Manitoba -- The mustard market has finally reacted to the decreasing Canadian production, which has been shrinking for several years. Mustard prices have had trouble being competitive, especially with canola's much higher yields. The result is totally predictable -- farmers planted smaller crops of mustard.
Now, the chickens are coming home to roost. There's no actual physical shortage, and traders still can pick up as much as they want, but now it's at a price.
Brown is the hot mustard, at least in terms of markets. It appears that at least one brown trader has been caught short and is scrambling for product. Europe is not yet harvesting and it has steady demand, much of which is being sourced out of Canada. Brown has traded around 30 cents per pound for years, but about last December it started climbing.
It's been 35 cents, then 37, then 38, and last week, some were trading at 40 cents. These are good prices for brown and they will have trouble maintaining that level once new crop becomes available. And new crop will become available in Europe before this year's already late Canadian crop.
Canadian mustard is not likely to be available commercially this year before mid-to-late September.
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American mustard manufacturers are starting to import brown mustard, not in volume, but this is a new and positive development.
The proportion of brown in this year's mustard crop is presumably higher than it was last year since new crop brown prices favored it over yellow at seeding.
Yellow mustard is strong. Prices moved higher last December and now trade around 40 cents per pound, with some sales at 42 cents. Demand remains strong but most on-farm stocks are yellow.
Oriental is, comparatively, the dog of the mustard classes. Eastern Europe is now a major producer. Prices have been easing higher -- from 28 to 29 and now 30 cents per pound. Oriental is probably the next mustard that will be short.
New crop mustard prices are mildly cheaper than old crop and it's rare that holding crop into an inverse is profitable. In any case, new crop plantings are higher and the tightness should ease, if only modestly.
Canola deliveries increase
The canola market has come under pressure recently as farmer deliveries increased now that seeding is complete. There is a tendency for farmers to increase selling in July, especially when prices are near historical highs and the upcoming crop is developing under favorable conditions. At the same time, commercial demand is easing toward the end of the crop year. Domestic crushers will start taking their down time and offshore movement is also slowing. New crop canola prices are also grinding lower as the recent rains and moderate temperatures set the stage for above-average yields.
The critical flowering period is still ahead and traders will be watching the 15-day forecasts, which at this time show no major risks. World vegetable oil values are grinding lower, which is spilling over into canola. Domestic crush margins have deteriorated, setting a negative tone to the market. U.S. soybeans are experiencing near optimal growing conditions in the major production regions. While the 2013 to '14 canola carryout will remain near historical lows, canola is being pulled lower by the world oilseed complex.
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New crop canola is trading at a $70 to $80 per ton discount to old crop.
World wheat prices grind lower
World milling wheat values from major exporters continue to grind lower. The Russian and Ukraine grain harvests will start the week of July 1, three weeks earlier than normal. The U.S. winter wheat crop is 20 percent harvested as of June 23 and yields and protein levels are coming in better than expected in Kansas. Keep in mind that U.S. farmers sell approximately 50 percent of their wheat in the summer, so there is a fair amount of pressure on the world market from the U.S. and the Black Sea.
Canadian and U.S. farmers have a fair amount of spring wheat to sell before the upcoming harvests. North American spring wheat carryout is above the 10-year average and on-farm stocks are high protein.
Therefore, basis levels are starting to ease. They usually make seasonal lows in mid August before the Canadian harvest.
Feed barley prices easing
Cash barley bids from Southern Alberta dropped to $279 the week of June 17, down from $296 in May. Cattle inventories are decreasing and feedlots have sufficient coverage into late July. Demand is fading, which is causing the market to soften. Farmers are moving remaining on-farm stocks as new crop is at a $50 discount to old crop. The market is telling farmers not to store barley into the new crop year. We continue to project softer prices later in summer.
Editor's Note: Duvenuad publishes the Wild Oats Grain Market Advisory. For a free copy, call 800-567-5671.
