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Published July 07, 2015, 09:21 AM

Duvenaud: Mustard markets bullish, soybeans higher

Mustard markets are bullish, but don’t get carried away. Statistics Canada says mustard seedings dropped from 500,000 acres last year to 325,000 this year — down 35 percent.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — Mustard markets are bullish, but don’t get carried away.

Statistics Canada says mustard seedings dropped from 500,000 acres last year to 325,000 this year — down 35 percent. Granted, there’s a fairly big carryover, 35,000 metric tons, but we are looking at tighter supplies next year.

The bigger story is the condition of crops. The first blow was the various freezes this past spring. Canola seed suppliers sold enough seed to replace 6 to 7 percent of canola plantings. Farmers reseeded in many cases to a cereal instead of more canola. An estimated 10 percent of canola froze.

About the same timeframe will hold for mustard. That would suggest 30,000 to 50,000 acres of frozen mustard, plus plenty of marginal fields.

A bigger problem is dryness. There are more than a few mustard fields only a few inches high.

Mustard seed dealers report that seedings were probably bigger than the Statistics Canada planting estimate, but harvested acres will be lucky to hit 325,000.

Prices are already moving higher. Yellow is at 35 to 40 cents per pound. New-crop is 40 cents. Until a month ago, new-crop was at an inverse to old. Brown is 29 to 30 cents. It moved up by 5 cents in the past couple weeks

While these are decent prices, mustards have room to move to the upside. Yellow could hit 45 to 50 cents at some point this winter. Brown and Oriental should both be more than 40 cents. Of course, Oriental is already there.

If you do carry your mustard past the end of the crop year, be prepared to hold it until Christmas. Processors will be giving first priority to taking in their contracts. You’ll have to wait in line for delivery.

The North American mustard crop is far from dead. Granted, it’ll have trouble making 600 pounds per acre, but there are some good crops in southern Saskatchewan, Montana and North Dakota.

Soybeans rally

Soybean futures have rallied $1.30 per bushel since mid-June. Pioneer at Mollard, Manitoba, is $10.72 per bushel on old crop and $10.37 per bushel on new. Local crushers have inventory to last to new crop. Although U.S. Department of Agriculture reports were mildly bullish, the futures reaction went far beyond any fundamental news.

There are still ample supplies of old- crop soybeans in the U.S. The new crop, while it has its problems, is 1.4 million acres larger than last year’s.

Canola prices move higher

Statistics Canada estimated canola acres at 19.78 million, which compares with the seeded area of 20.325 million acres last year. Given the dryer condi-

tions, we are now using an average canola yield of 28 bushels per acre, which will result in a crop size of 12.6 metric tons, compared with 2014 production 15.6 million metric tons.

The 2015 to ’16 canola fundamentals will be extremely tight, as the market will need to ration demand away from export channels and cause the domestic crush pace to slow. The forecast for Alberta and Western Saskatchewan calls for above-normal temperatures and below-normal precipitation during the next 30 days.

Barley market becomes hot

Major feedlots in Alberta and Saskatchewan have been caught off guard by the recent drought-like conditions. The market continues to percolate higher, given the lack of farmer selling, while end users continue to increase coverage at the higher levels.

We have not made any sales recommendations for new crop and think the barley market could move higher by $30 to $40 per metric ton rather quickly.

Statistics Canada estimated 6.21 million barley acres, which compares with the 2014 seeded area of 5.9 million. We are estimating an average barley yield of only 50 bushels per acre, and using a traditional abandonment rate of 10 percent, we now think the 2015 crop could finish at 5.8 million metric tons, down from the 2014 production of 7.1 million metric tons.

Wheat market higher

U.S. winter wheat farmers generally sell 50 percent of the wheat crop from June 15 through the end of August.

All wheat futures markets have been experiencing significant speculative fund short covering, which has caused a major rally in the past week. The upside, though, has been limited from harvest hedge pressure and favorable conditions in the U.S. spring wheat region.

Duvenaud publishes the Wild Oats Grain Market Advisory. For a free copy, call 800-567-5671 in Western Canada and North Dakota. All others call 204-942-1459.