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Mustard Trade May Register Healthy Growth in 2020-2021 Marketing Season

Abhijeet Banerjee
Abhijeet Banerjee
mustard news
Mustard Crop

RM Seed/ Mustard markets had seen a smart upside rally during the second fortnight of March, in response to sharp gains in edible oils as well as soybean. Lower arrivals in Rajasthan, and steady retail offtake (on account of Festive season) added to the upward trend.

The NCDEX grades of RM seed in Jaipur market on later days of March were traded slightly above Rs.6000/qtl up Rs.200/qtl versus February end price. Limited stocks lying in the accredited warehouses of NCDEX added to the bullish tone. In context to the derivatives market, the April contract at NCDEX rebounded sharply from the low of 5320 and established high of 5931 in the month of March.  

Mustard prices in year 2020 had appreciated sharply after the Corona related problems started reducing, giving stockists, investors, traders and farmers decent returns on their purchase/production costs. RM seed prices were seen in a moderate range during 2019, but there had been wider price swings in 2020, and as against peak arrival season’s levels i.e. April 2020 average offers, prices are up closer to 50% currently. The commodity was able to attain new highs around 6500-6600 (Best grades) in 2020, due to significant improvement in demand for mustard oil as well for the mustard/RM seed.

In fact, mustard even surpassed 5000 level after so many years.  Sharp appreciation in edible oils has also attributed to the price gains in addition to lowering inventory against a reduced crop size of 2019-2020 season, which was negatively affected because of heavy and untimely rainfall across regions of Haryana and Rajasthan during March and April months of the previous year. There was an intermittent downward phase after Diwali and the upward trend resumed December onwards and ended the year on a healthy note. Government’s hike in RM seed MSP by Rs.225/quintal, to Rs.4650/quintal had encouraged buyers’ participation after the third week of September 2020.    

In context to the current fundamentals, the planted area is much above previous years’ therefore production is estimated more than past year. As per mark talks we expect India’s crop size for this year between 80-85 Lakh tonnes. There is continuous parity in crushing of mustard/rape seed and reports say that few of the soybean processing plants have started the crushing operation in this oilseed, considering the emerging business potential in this oilseed. Earlier, the market was anticipating a decent fall in prices after February considering the approaching new arrival season and down correction in edible oils and soybean. But international cues of Soy complex and Malaysian palm oil were positive constantly, which resulted in edible oils and soy complex markets continuing with the upside rally even after the February month. At the same time, clarity regarding tightening old crop inventory also improved. Therefore ideas started building up that markets in near future would not be affected much from the new season arrival pressure.

The harvested arrivals are likely to intensify by second or third week of this month, and Holi demand is over. The Ramadan season purchases are almost complete. Nevertheless the carry forward inventory is much less year on year while crushing demand is robust, because of consistent requirement for stockists of mustard oil, amid fears of price appreciation in near future. It can be also inferred that buyers will have lesser scope of getting reasonable discounts while negotiating for the deals. As the broader factors are positive for mustard prices and there is constant demand for stocking as well as crushing of mustard seed, it is highly possible that the overall business for this commodity may grow significantly this season. But for the short run i.e. next one or two months, sellers may be forced to offer their price their produce lower, since the harvested crops will start arriving in the mandis with increasing pace. 

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