Nafed cancels mustard bids

The decision is likely to push up prices of edible oils

The National Agricultural Cooperative Marketing Federation of India (Nafed) today rejected the bids for its first tender for the sale of the 2 million tonne of mustard it has procured this season. It has decided not to sell below Rs 1,750 per 100 kg. The highest bid in today's tender was Rs 1,681 per 100 kg.

"We have decided not to accept any bids and cancel the tender as we feel can get a better price for the procured mustard," said Alok Ranjan, managing director, Nafed.

The decision is likely to push up prices of all edible oils. As talk of the cancellation spread, the ex-Jaipur physical market price of mustard seed rose to Rs 1,810 per 100 kilograms from Tuesday's Rs 1,775.

"Mustard seed prices saw a sharp rise today following talk that Nafed had cancelled the first tender. This is likely to keep the prices firm till next Wednesday (20 July, 2005) when Nafed's second tender opens," said Rajini Panicker, head (research) at Mumbai-based Refco Commodities Pvt. Ltd.

The bids were for 8,000 tonne mustard in volume terms. While the highest bid was from Uttar Pradesh, bids from Rajasthan, the main producing state of seed, were at Rs 1,603 per 100 kilograms and that from Haryana at Rs 1,613. The federation feels that it will be able to get a higher price than the bids it has rejected following an overall rise in prices.

"We have bought mustard at Rs 1,700 and after the carryover costs, our cost price will be atleast around Rs 1,870 per 100 kilograms."

Nafed has procured mustard at an all-time high of 20.9 lakh tonne at the minimum support price of Rs 1,700 per 100 kilograms in 2005-06 . The procurement, which was done in April-June, was made under price support scheme under union government.

Nafed has spent around Rs 3,500 crore on mustard procurement in two tranches. The first tranche was of Rs 2,000 crore and the second of Rs 1,500 crore. Government had initiated procurement of mustard in a bid to support prices following a bumper crop.

As per official estimates, the country's total mustard output in 2004-05 (July-June period) is around a record 7.64 million tonne, up 23 per cent from a year earlier. Industry estimates, however, peg output at 6.25 million tonne.

On talk of a bumper mustard crop, mustard prices were down to Rs 1,480-1,500 per 100 kilograms in the open market. At this time, Nafed began procuring at around Rs 200 higher than market prices, thereby, offering farmers a better place to offload their produce.

For a fortnight now the mustard price "" physical and futures "" has been on a surge from around Rs 1,700 per 100 kilogram to over Rs 1,800 on Wednesday. This clearly indicates that the government has been able to keep prices firm rather than allowing speculators to play around.

Market players feel mustard seed prices will remain firm sending a signal to the whole edible oil complex. However, a section of traders also said the remaining days of the week may be good days to sell now as the prices are at all-time high of the current season.