Mustard seed prices were likely to ease in April as arrivals were expected to increase then, but would continue to stay firm for now due to lower-than-normal arrivals and good demand in physical markets, said traders and industry officials.
The price of mustard seed in the key Jaipur market in Rajasthan is about Rs 2,550 per 100 kg currently, and was expected to rise to Rs 2,600 by March-end, they said.
“Prices of mustard seed have been rising since the last few days mainly as arrivals are not up to the mark. Once it (arrivals) starts increasing, prices will come under pressure,” said Jyoti Kanda Aggarwal, general secretary of Mustard Oil Producers Association. As soon as the arrival pressure builds up, mustard prices could fall by Rs 100 per 100 kg from the current levels, said Anil Chattar, trader at Jaipur-based Madhur Trading Agency.
Vijay Solvex Managing Director Vijay Data said the medium-term bearish outlook was being mirrored by mustard seed futures on the National Commodity and Derivatives Exchanges, which was showing a mild backwardation, a scenario where far-month contract trades at a discount to current month.
“I feel that more than the fundamentals, speculative activity in futures market has pushed up mustard prices. Arrivals are lower this year but at the same time the crop size is good, and carryover stocks are high,” said Deviprasad Khandelia, managing director, Khandelia Oil and General Mills.
The Central Organisation for Oil Industry and Trade (COOIT) has estimated India’s mustard seed output in 2009-10 (October-September) at 6.4 million tonnes, as against 6.7 million tonnes a year ago. Although the figure is lower on year, it is substantially higher than earlier industry estimate of 5.9 million tonnes. However, some traders say production might not be as high as COOIT’s estimate and will be around 6-6.2 million tonnes.
“Mustard crop is likely to be about 5 per cent lower than COOIT estimate and even yield is not expected to touch last year’s level,” Aggarwal said.
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Lower arrivals
Arrivals of mustard seed are lower this year due to delay in harvesting and holding back of stocks by farmers.
Currently, 300,000-350,000 bags (1 bag = 85 kg) of mustard seed arrived daily across the country, sharply down from about 600,000 bags at this time of year, said traders and industry officials.
Arrivals in Rajasthan, the largest mustard producing state in India, were at 200,000-250,000 bags, down from over 300,000 bags a year ago, Chattar said.
“This year harvesting was delayed by 15 days as February was cold in most mustard growing regions. Moreover, farmers have seen higher prices, so they are holding back their stocks. Hence, arrivals have been lower,” Aggarwal said.
Paras Jain, a Jaipur-based trader said mustard harvesting had been delayed as wheat harvesting was underway.
“Arrivals were lower also because of festivals like Holi and Navratri in March, during which trading activity in spot markets is subdued,” Khandelia said.
The other factor that has affected the pace of arrivals is labour shortage in most growing areas.
“Usually, we can see 600,000-650,000 bags of mustard seed arriving in the last week of March. But, this year we will be able to see this quantum of arrivals in the first or second week of April,” Khandelia said.
In Haryana, mustard seed is arriving in small quantities, but supply will be higher in the coming days, in turn undermining prices, he said.
“I am expecting arrivals pressure to rise in April and continue in May as farmers bring more stocks after Akshaya Tritiya on May 16,” Data said.
Normally, wedding season started with Akshaya Tritiya and farmers raised money around this time of year by selling produce, Data said.
Demand scenario
Buying interest in mustard seed from stockists and millers was good, as demand for mustard oil and mustard seed meal was firm, said traders and industry officials.
“Demand for mustard oil cake is good in domestic markets. We are also getting fair amount of export enquiries. This is supporting prices,” Chattar said.
India’s mustard seed meal exports in January-February were around 120,000 tonnes as against 55,000 tonnes during the same period a year ago.
However, crushers were not buying mustard seed in large quantities due to poor margins, which would weigh on prices in the long run, Jain said.
“Farmers are not selling their produce at lower levels. So, crushers are buying seeds at higher rates but realization from sale of mustard oil and meal is not good. Hence, their margins are hit. I think, just like soybean, crushing in mustard might be lower this year and we will end up with high carryover stock,” Data said.
The main factor that would determine prices of mustard seed in the future was the rate at which the farmer was willing to sell his produce, said industry officials.