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Despite bumper output, don’t see much fall in mustard seed prices: Anand Rathi

 

Vedika Narvekar

Mustard seed production has risen tremendously this season. Sowing area rose around 3 percent while the weather has been conducive throughout the growing period.

With a bumper crop of mustard, supply pressure has increased in the spot market. Thus, the downswing in mustard-seed prices, which started in December, extended till March.

Indeed, the current price (Rs 3,750) is much below the Minimum Support Price of Rs 4,200 a quintal fixed by the government for the 2018-19 season. Nevertheless, good quality arrivals, higher oil content and better crushing margins led crushers and stockists to buy mustard seed in the spot market. Accordingly, crushing rose 18.8 percent from last year, restricting a further fall in prices.

Arrivals of mustard seed started in late February and are now at a peak. Data compiled by the Mustard Oil Producers Association of India shows mustard seed supply in March was 14 lakh tonne and mills crushed around 9.5 lakh tonne during the month.

On the supply front, 2018-19 mustard-seed production is estimated at around 81 lakh tonne, up almost 14 percent from last year. The sowing area increased slightly, by 3.4 percent to 69.37 lakh hectares, with the climate being favourable throughout the growing season, leading to an increase in the average per-hectare yield across the growing states.

India mainly exports mustard meal and imports mustard oil. Mustard meal is the second-largest exported oilmeal after soymeal, and accounted for approximately 33 percent of oilmeal exports in FY18-19.

During FY18-19, Indian mustard-meal exports surged 58 percent to 10.5 lakh tonne due to robust demand from traditional buyers, including South Korea, Vietnam and Thailand. Trade sources expect a further 35-40 percent jump in exports in FY19-20 due to demand from China after it lifted a six-year-old import ban on Indian mustard meal.

Thus, despite a bumper output, we don’t see much fall in mustard seed prices, considering export demand for meal.

At the present juncture, all-India arrivals are 6.5 lakh bags and may hover around these levels for the next 10-15 days. Demand, too, is robust due to higher crushing margins. Going by seasonality, mustard-seed prices may rebound once supply pressure starts receding.

The author is Research Analyst- Agro Commodities at Anand Rathi Shares & Stock Brokers.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.




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