Mumbai (Commoditiescontrol) – Indian mustard futures trade with weak bias during previous session with steady arrivals in cash market along with fall in neighboring soybean and palm prices. At the end of week, mustard seed Benchmark contract May’19 futures finally closed at INR 3800 per quintal, down by 1% on weekly basis. Open Interest in May’19 futures increased sharply from 51700 lots observed last week to 74410 lots.
Arrivals of mustard seed started in late February, spiked significantly in March and are now decreasing on gradual basis. Data compiled by the Mustard Oil Producers Association of India shows mustard seed supply in March was at 14 lakh tons and mills crushed around 9.5 lakh tons during the month.
At the present juncture, all-India arrivals are 5.5 lakh bags and may hover around these levels for the next 10-15 days. Amongst the biggest mustard producing state- Rajasthan accounted for 3.25 lakh bags, MP accounting for 45 thousand bags, UP at 60 thousand bags, Haryana and Punjab at 50 thousand bags, Gujarat at 25 thousand bags, while other states contributing for 45 thousand bags. Demand, too, is robust due to higher crushing margins. Going by seasonality, mustard-seed prices may rebound once supply pressure eases in medium term (3-4 weeks).
On the supply front, 2018-19 mustard-seed production is estimated at around 81 lakh ton, up almost 14 percent from last year. The sowing area increased slightly, by 3.4 percent to 69.37 lakh hectares, with the climate being favorable throughout the growing season, leading to an increase in the average per-hectare yield across the growing states.
With a bumper crop of mustard, supply pressure has increased in the spot market. Indeed, the current price (Rs 3,750) is much below the Minimum Support Price of Rs 4,200 a quintal fixed by the government for the 2018-19 season. Nevertheless, good quality arrivals, higher oil content and better crushing margins led crushers and stockists to buy mustard seed in the spot market. Accordingly, crushing rose 18.8 percent from last year, restricting a further fall in prices.
Mustard meal is the second-largest exported oilmeal after soymeal and accounted for approximately 33 percent of oilmeal exports in FY18-19. During FY18-19, Indian mustard-meal exports surged 58 percent to 10.5 lakh tons due to robust demand from traditional buyers, including South Korea, Vietnam and Thailand. Trade sources expect a further 35-40 percent jump in exports in FY19-20 due to demand from China after it lifted a six-year-old import ban on Indian mustard meal.
In short term basis, sluggish domestic fundamentals with rise in supply along with prevailing weakness in overall veg oilseed complex shall keep mustard prices in rangebound note with negative bias.