New pricing strategy for mustard capital inc.

Source: Saskatchewan Agriculture and Food

Mustard producers now have the option of choosing from three new pricing contracts when selling their product to Mustard Capital Inc. (MCI) in Gravelbourg.

The dry mustard mill began operating a few weeks ago, and produces flour, oil and bran products. MCI has created two averaged-priced contracts that will give producers the opportunity to share in the upside of price surges in mustard markets.

"These changes were necessary due to the current volatile market," said Tom Halpenny, CEO and member of the MCI board of directors. "Currently, mustard prices are fluctuating, creating uncertainty."

Halpenny explained the three pricing contract options available to farmers.

The first option allows producers to take a spot price on delivery, which is very similar to what is offered traditionally. The prices offered will fluctuate daily, and if a producer likes the current price, he or she is able to book into a purchase agreement.

The second option allows producers to average the daily prices from the time the contract is signed to July 31 of the crop year in which the average is calculated, with delivery based on MCI's call.

The third option allows producers to select one of four 60-day pricing and delivery periods beginning on December 1, 2007, with price averaging during that time frame and guaranteed delivery.

Halpenny says the new pricing options give producers the opportunity and flexibility to participate in future price rallies. "Producers are able to lock in a minimum price, which would be paid at the time of delivery," he noted. "Then, we pay the amount owing if the average is greater than the minimum price. This process allows producers upside potential if the market increases, with no downside risk."

Yellow mustard has topped 40 cents per pound this fall. For producers who think the rally will continue, the price averaging contracts will be enticing. MCI hopes these options will attract long-term suppliers who will provide the company with the stability it needs in the tough international market for food ingredients.

Halpenny stated that MCI has recognized two deciding factors with respect to pricing options. "We want to secure our supply, but we recognize that producers want to extract as much value as they can from the marketplace. Our pricing options match these objectives," he said.

For the averaging options, the minimum price is paid at the time of delivery, with the amount owing being paid within 10 days at the end of the averaging period. Average price is calculated using Stat Publishing's daily posted price, which is the average of five brokers' daily spot prices.

All of the contract options include paid storage from the time the producer signs an agreement until the time of delivery.

The volatile prices in the mustard market are the result of decreased supply. Although mustard acres in Western Canada were up this year, production was average when combined with the carry-over from last year.

Production from this year still leaves less supply than was available last year at this time. As well, production declined in eastern Europe, further decreasing supply. Consequently, with limited supply, prices are trending higher.

More information regarding pricing contract options can be obtained by contacting MCI at (306) 648-2799.

For more information, contact:

Tom Halpenny, CEO
Mustard Capital Inc.
Phone: (306) 648-2799