The Mustard Report

Production:

India

In March last year, Rapeseed prices were hovering below Rs6,000 where most of the farmers sold their produce. However post that the prices surged to record highs in September. This attracted more and more farmers to allocate their production land to the rapeseed crop for the next season which resultedin a record high sowing area to be followed by all-time high production in the current season.

As per the second advance estimates of Agricultural production,India is expected to produce 11.45 Million Tonnes of Mustard seed in the crop year 2021-22 against the targeted production of 10.2 Million Tonnes and against the last year’s production of 10.21 Million Tonnes.

In a recent release by Central Organisation for Oil Industry & Trade (COOIT) for estimates of mustard seed production for 2021-22 crop year the organisation pegged the production to an all time high of 109.50 lakh tonnes, up 29 per cent against the 85 lakh tonnes produced in the previous year in the previous year.

The area under coverage has been pegged at 87.44 lakh hectares while the average yield is seen at 1,270 kg per hectare.

Production in Rajasthan, the largest mustard producing state is expected to increase upto 49.50 lakh tonne in 2021-22 from 35 lakh tonnes in the previous year. In Uttar Pradesh, production is likely to increase from 13.5 lakh tonnes from 17 lakh tonnes.

Production in Madhya Pradesh is estimated to rise to 12.5 lakh tonnes from 8.5 lakh tonnes. In Punjab and Haryana, mustard seed production is expected 11.50 lakh tonnes, up from 9.5 lakh tonnes in the previous year.

Production in Gujarat is expected to rise at 6.5 lakh tonne as against 4 lakh tonnes in the previous year. The output in West Bengal, eastern India and other states is likely to remain the same 14.5 lakh tonnes as of last year.

World

This month the United States Department of Agriculture (USDA) estimated the World Rapeseed Production to be 71.18 Mn MT, around 0.06 million tonnes more than the previous month's projection.

Rapeseed Production last year was 73.60Mn MT. This year's 71.18 estimated millions tons could represent a decrease of 2.43 Mn MTor 3.30% in rapeseed production around the globe.

Supply situation & Impact

Rapeseed prices were below Rs 6000 per quintal in March 2021 when farmers started selling the last crop, but jumped to a record Rs8,813 in September. The rally prompted farmers to allocate more land to rapeseed when they started planting winter-sown crops in November.

Total arrivals across major mandis of the country have been around 7.22 lakh MT against last month’s arrivals of 13.08 MT. this reduction in arrival is due to farmers keeping away from selling at current rates in anticipation of higher realization in future.

As a result, Crushing could lose momentum in the coming months as many farmers are holding back from selling to oilseed processors in the hope of prices rising further.

So despite the Crop being far more than the last year, crushing won’t pick up unless farmers sell their harvest.

Slow farmer selling coupled with falling supplies of sunflower oil from Ukraine, could force the world’s biggest importer of edible oils to increase overseas buying of palm oil and soya oil, despite the record rapeseed crop.

Government have made efforts to control the surge in oilseed/oil prices by imposing strict stock limit on edible oil, oilseeds till December 31, 2022.

Now, processors can store only 90 days’ worth of storage/production capacity while retailers can hold up to 30 quintals and wholesalers can store up to 500 quintals of edible oil. As for oil seeds, retail traders can stock up to 100 quintals while wholesalers can store up to 2,000 quintals. Processors can store up to 90 days’ worth of production as per daily production capacity

Overall Scenario

Demand for mustard seed has been steadily growing as the prices are getting support on robust demand after reduction in the import of sunflower oil due to ongoing war between Ukraine and Russia which exports 70% & 20% of India’s requirement.

Sunflower oil supply worries amid Ukraine-Russia War have resulted in firm demand for alternate oils like mustard, soyoil, and CPO across the globe.

Moreover, India imports around 13-13.5 million tonnes of edible oils, of which around 8-8.5 million tonnes (around 63 per cent) is palm oil. Of this, 8-8.5 million tonnes of palm oil, almost 45 per cent comes from Indonesia and the remaining from neighboring Malaysia. While Indonesia’s decision of oil export ban beginning from April to control the heating domestic prices of oils will add the global supply worries and would support the mustard prices further.

Higher crush margin and soaring trend in soybean oil, CPO, and other oils have also supported Mustard oil prices.

Slow farmer selling, coupled with falling supplies of sunflower oil from Ukraine, could force the world’s biggest importer of edible oils to increase overseas buying of palm oil and soya oil, despite the record rapeseed crop.

Price Outlook

Mustard seed prices are getting support from soaring edible oil complex. The short-term range is seen between Rs6700 and Rs7300. A sustainable break of this range will result in medium term uptrend and sharp strengthening of prices in the near term.

Fundamental factors are strongly supporting the price outlook. Till the time the ongoing war between Russia and Ukraine ends the supply crunch of sunflower oil will continue to support domestic prices. More upside can be triggered if oil export ban by Indonesia stays for long.

Technically, Mustard spot Prices will be forming a base at around 6500-6700 price mark and continue to trade with positive bias throughout the season.Any sustainable break above 7380-7400 mark will push prices further up towards 7750-7900 price mark in the major spot markets.

Prepared by NBHC Research Team