Can't tell you from whence but it is used with some frequency here in New England! Also stuff like :
"That process just doesn't cut the mustard."
"She's too short to cut the mustard."
"He too dumb to (be able to) cut the mustard."
"The company's pension plan just didn't cut the mustard."

However I have faith someone will know the origin.,

More about mustard:
Isn't there a Bible reference about being able to get into heaven even though faith "be smaller than a mustard seed?"

As long as we are on the suject ... any more mustard references *not* connected to food ? ! ?

LATER - Dr B got on board before I could ... seems he's just about covered the subject