Export demand from China, rising consumption will support rates
Mustard seed prices rose by 0.14 per cent to Rs 4,183 per quintal in futures trade on Friday after participants widened their holdings, tracking a firm trend at the spot market. This, according to traders, can be attributed to a firm trend on strong demand from oil millers.
At the National Commodity and Derivatives Exchange (NCDEX), mustard seed for January 2019 gained Rs 9 (0.21 per cent) to Rs 4,183 per quintal having an open interest of 6,440 lots. Also the delivery for December advanced by Rs 6 (0.14 per cent) to Rs 4,183 per quintal in 45,140 lots. Earlier, last to last week, rebounding from the early trade, mustard futures contracts on NCDEX had edged higher on reports of a fall in imports of canola oil, a substitute of mustard oil. Canola oil imports during 2017-18 November-October fell 18 per cent to 240,625 tonnes YoY, according to data released by the Solvent Extractors’ Association of India.
In October, mustard futures on the NCDEX declined more than 3 per cent from its highs. But in September prices gained 4.8 per cent (Rs 191 per 100 kg) to close at Rs 4,181 on anticipation of higher minimum support prices and continuous improvement in physical demand from the oil mills.
Mustard oil mills crushed 600,000 tonnes oilseed in October, up 33.3 per cent from a year ago, according to data compiled by the Mustard Oil Producers Association of India. Crushing was higher because of improved demand from oil millers and on reports that China has allowed imports of Indian mustard meal exports.
China had in the previous month lifted the ban on imports of mustard meal and this reinforced hopes that oilmeal exports in near future would get a fillip. China had banned Indian mustard meal imports in 2012 on quality concerns.
Analysts say crushing could have been higher but mustard seed arrivals shrank with the start of the lean season. The month-on-month crushing was 20 per cent higher. Rabi oil seed (mustard) is sown in September-October and harvested from February. Normally, arrivals of new crop begin in February and gain momentum by March.
Significantly, India produces around 8-9 million tonnes of mustard oil annually.
Mustard is an important cash crop, the area under cultivation being over 6 million hectare. In fact, mustard accounts for 30-35 per cent of India’s overall edible oil production. Analysts said even though there is a geographical bias in its usage, Indian consumers use mustard oil in large quantities. A study conducted by Yale University and Princeton University found that 90 per cent of mustard oil in India is used for cooking; only 10 per cent gets into pickling, massage, hair care, etc. Across the past decade or so, the consumption of mustard oil has grown significantly, spurred on by medical research that has comprehensively reiterated the significant health benefits of mustard oil, particularly in reducing the risks associated with heart disease, hypertension and obesity. Many young consumers have been returning to the mustard oil fold. This trend is borne out by the fact that while India’s edible oil consumption grows at 3 per cent annually; mustard oil use is growing at 20 per cent.
Marketers are also feeling the spiraling demand for mustard oil. Vivek Puri, managing director, Puri Oil Mills, the company that manufactures P Mark mustard oil, said: “Across all our markets, the demand has been rising sharply and our multiple manufacturing facilities have been working 24x7 to meet the surging demand.”
On the basis of these data points, it’s clear that mustard oil’s circle of influence is expanding rapidly.
Thus, analysts said the mustard futures are expected to get a boost from the news that China allowed meal imports from India. But strict quality parameters, export guidelines and registration formalities have dampened exports in the near-term. Moreover, reports of good start to mustard sowing in Rajasthan and UP also weighed on prices recently.