I found this on a web search:

"The expression "too old to cut the mustard" dates back to when people made mustard at home by grinding mustard seed and adding just the right amount of vinegar ("cutting the mustard") to balance the taste. If too much vinegar was added, the whole concoction tasted terrible, so the balance was critical. Many families found that elderly members tended to add too much vinegar resulting in the saying." (pg 92)