Nafed stops mustard purchase on a low note

The National Agricultural Cooperative Marketing Federation (Nafed) has ended the procurement of 2006-07 rabi mustard with the purchase of a mere 21,000 tonnes.

"We have stopped the procurement of mustard. The federation has bought only 21,000 tonnes mustard, with 20,000 tonnes coming from Rajasthan alone. We have been able to buy mustard only in areas where the prices were lower than the minimum support price (MSP)," said Kailash Jyani, additional managing director of Nafed.

The price of mustard ruled in the range of Rs 1,800-1,900 a quintal in most markets. This was significantly higher than the government-offered MSP of Rs 1,715. It is a good sign that the farmers got better prices for the commodity, added Jyani.

The federation is currently having a mustard stock of 0.7 million tonnes. It is not selling mustard right now and will decide on it in June.

The federation had procured 2.1 million tonnes mustard in the 2005-06 rabi season at a MSP of Rs 1,715 a quintal and 2.09 million tonnes in 2004-05 at a MSP of Rs 1,700 a quintal. Such huge purchases were primarily due to lower market prices.

The farmers in Rajasthan, Uttar Pradesh and Madhya Pradesh have diverted land from oilseeds to crops such as wheat and chana owing to the bullishness in these commodities.

This resulted in a decline in oilseeds production. According to third advance estimates by the ministry of agriculture, the oilseeds production this year will be 23.26 million tonnes, 16.8 per cent lower than last year's final estimates of 27.97 million tonnes. The mustard production is seen at 6.69 million tonnes, down 15 per cent from last year's 7.88 million tonnes.

The impact of low mustard procurement by Nafed will be seen on the prices of edible oil in the coming months. With merely 7 lakh tonnes, the federation will not be able to impact the market prices.

The prices of mustard oil have gone up from Rs 700 (15 kg tin) to Rs 770 in the last two months.

"There is a worldwide firmness in edible oil this year. Our country is meeting 45 per cent of its demand from imports. Moreover, the domestic production is low and the rising trend is expected to continue," said Ramesh Garg, chairman of KS Oils, the country's leading mustard oil producer.

Edible oil has a weightage of 2.76 per cent on the wholesale price index (higher than cement's 1.73 per cent, wheat's 1.38 per cent and 2.45 per cent of rice) and its rising price is likely to show up on the inflation figures in the coming weeks.