Mustard markets currently trading downwards – will the trend continue?

Presently mustard markets are trading with a downward bias - mainly because of bearish tone in edible oils like soya oil and palm oil. Weakness in these oils imbues similar tone to mustard oil hence bearish for mustard/RM seed as well. Markets had turned quite expensive which resulted in tapering demand situation.

As such, prices have undergone consistent downward revisions in recent weeks. Mustard prices had appreciated sharply during the latter part of 2020, after the Corona related problems started reducing, giving stockists, investors, traders and farmers decent returns on their purchase/production costs. The commodity was able to attain new highs around 6600-6800 (Best grades) last year due to significant improvement in demand for mustard oil as well for the mustard/RM seed. Sharp appreciation in edible oils has also attributed to the price gains in addition to lower inventory levels, against a reduced crop size of 2020-21 Rabi season, which was negatively affected because of heavy and untimely rainfall across regions of Haryana and Rajasthan during March and April 2020. The upward journey has continued this year also. The momentum had cooled to some extent between January and February 2021, mainly due to profit booking by farmers/corporates or stockists.  

The trend resumed March onwards and continued till May month, when the NCDEX specified grades traded as high as Rs 7700-7800/qtl. Sharp gains in edible oils and soybean, followed by limited pace of arrivals in Rajasthan (farmers and stockists preferred bringing lesser quantity for sale against improving price outlook) and steady retail off take in physical markets supported the price rise during this period. Prices for the NCDEX specified grades in Alwar and Jaipur have fallen by Rs.300-400 Rs/qtl approximately when compared with the May-end offers. 

Moving forward the cheaper availability of RM seed shall be attracting stockist’s attention to purchase and at the same time prompt farmers to hold their sale for a while. In coming weeks, arrivals in spot markets will reduce further as the commodity enters its lean season, while lockdown restrictions may not continue for a longer span. Last year’s drop in production and tightening inventories for this year will be the other major bullish drivers in the longer run. 

But in the shorter run, markets may trade with a limited upside unless edible oil markets show recovery signals. In Jaipur and Alwar markets, mustard prices may be observed between Rs. 6600 and Rs 6900 per quintal this week under given scenario. In the longer run, prices may move towards the 7800-8000 level.