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Speculative Action Pushes Mustard Seed Prices; Steep Correction Seen

6 Aug 2020 8:53 pm
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Mumbai (Commodities Control) - Mustard seed prices have soared 30% in just 3 months’ time due to amid deep speculative activity on the futures platform, while spot market fundamentals are pointing in the other direction. Experts foresee heavy decline in the commodity prices in coming days.

It is to be noted that mustard seed prices on futures platform have upped from Rs 4000 in April to the levels of Rs 5245 recently. Although in spot markets prices have tanked after touching levels of Rs 5200 per Quintal.


Traders reveal that mustardseed demand is, in fact, quite low, and spot prices are solely supported by firmness in the futures market.


According to a Jaipur-based broker, “ Mustard oil prices have moved past Rs 110 due to firm mustard seed prices. In retail, mustard seed oil is priced around Rs 130 per Litre. Meanwhile soybean oil is relatively cheaper. This has weakened demand for mustard oil.”


Sources confirm that bulls are active in the market at the moment; responsible for creating an artificial scenario of tight supplies. Around 6.5 Lakh tons of mustard has been crushed since April this year, Which is 28% lower than last year. Although crushing upped 8% during May touching 8 Lakh tons.


Trade sources reveal that the market expects crushing of 21 lakh tons for the June quarter, that is 9% lower as compared with the corresponding period last year.


It is to be noted that mustard seed output is seen dropping 5% this year. Trade estimates point towards an output of 76 Lakh tons this year. In its third advance estimates, Centre reduced its production estimates from previous 92 Lakh tons to 87 Lakh tons this year.


Having said so, consumption is still below than the current availability of the oilseed.


The annual consumption of mustard is around 72-74 lakh tons, while opening stock for the year is seen at 5 Lakh tons, taking mustard seed supplies in the country to around 81 Lakh tons.


Traders reveal that demand for mustard oil has particularly risen during Corona times due to its perceived immunity booster feature. However consumption is still below the average mark. This means, around 45 lakh tons of mustard stocks are sitting around with farmers, traders and Nafed.


Meanwhile, demand generally weakens with the arrival of new crops in October. This is the reason, traders are hoping for a closing stock of around 4 lakh tons.


According to Manoj Jain of Prithvi Finmart, mustard is moving in the opposite direction of its fundamentals. Jain adds, exchange warehouses could not titan stocks due to pandemic-led lockdown. This is the reason why hefty short covering was seen in the near month contract. It is to be noted that as on 5th August, NCDEX warehouses have stock of 6635 tons of mustard, while August contract registered open interest of 37,190 lots.Meanwhile, all the far month contracts past August are running on discount to current month.


Experts attribute the strength in mustard to firmness in global soy oil and palm oil. However, Brazilain soybean output is set to touch a record level of 13.26 tons and soybean planting in the U.S is running head by 8.4% as compared with last year.


Having said so, in view of the current supply and demand picture, mustard prices are seen falling to Rs 4500 by October.

(Commodities Control Bureau)


       
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