MUMBAI (Commoditiescontrol) - India is likely to produce 55-58 lakh tonnes of mustard seed this year, which is 15 per cent lower compared to last year's production, said an official of a multi-national company on the basis of anonymity. He said availability of carry forward stocks in the country, as on February 28 estimated at 2 lakh tonnes, is expected to fully utilized by March-end. However, the production is sufficient enough to cater domestic demand despite fall in output. Kachhi ghani industry requires around 4 lakh tonnes of mustard seed to meet its requirement and hence there is no need to worry about supply.
Mustard oil is unlikely to survive against refined soy oil lying at Kolkata, Mumbai and Kandla port due to difference of Rs 15/kg. Due to this huge gap, soy oil will be converted to DO and is used for blending with kachi ghani mustard oil. This blending process accounts for 10 per cent total oil production. Its impact on total oil consumption will be further diluted considering the fact that only 10 per cent of total mustard oil production is sold under packaged oil, while remaining 90 per cent is sold as lose. Mustard oil will be able compete with soy oil only if it’s blended with lose oil.
India government has authorized 5 per cent blending in mustard oil, but it required full disclosure. A pack should provide name of blended oil. If 10 per cent mixing is done with lose mustard oil, the mixing goes unchecked by authorities.
Meanwhile, mustard oil prices are likely to shed Rs 3-4/kg by May. It is currently trading around 70-72/kg. Mustard seed supply will be at its peak and oil may benefit from the fall in mustard seed prices. However, edible oil imports will increase due to fall in mustard seed production by around 5 lakh tons this year compared to a year ago.
Putting his view on mustard cake, the official said there would not be any issue in case demand improves from China. The demand is sluggish as of now, however, it is receiving shipment in scattered quantity. According to the official mustard cake prices could drop to Rs 1,700/100kg. He assume it to be low level. Mustard cake is expected to be consumed for cattle feed on a regular basis.
He added that the government should raise import duty on edible oil to safeguard the interest of domestic oil industry. This will help domestic industry to compete with cheap global oil and enhance new industry. At present imported edible oil is available at Rs 60/kg, while oil manufactured domestically is priced at Rs 100/kg.
Due to this huge gap domestic oil finds it difficult to survive and that is strong enough reason to encourage oil blending. Also minimum support price (MSP) should be raised on oilseed. Oilseed MSP hike, making available better quality seeds to farmers, subsidy on fertilizers are some of the measures required to taken in order to encourage farmers to shift back oilseed harvesting.
This official has voiced his discontent over the recent change in NCDEX mustard seed contract specification. The latest amendment allows mustard seed delivery having an oil content of 39 per cent as against earlier level of 42 per cent. The reason for such changes is best known to NCDEX, the official said, this is beyond comprehension of many traders who continue to be ignorant of changes and resultant impact of the commodity.
Currently, the mustard seed, which is delivered against the contract, contains 42 per cent oil portion. Against this back-drop, it seem that the changes made to contract specification is uncalled for. He pointed out that the futures trade were allowed with an hedging objective, but the markets seems to be promoting all other elements except hedging. "They are running a casino", he said distastefully.
He accused the exchanges of legalizing gambling which is otherwise an illegal activity in our country. I dare exchanges to provide complete details on hedgers’ participation in derivative trade.
(By Commoditiescontrol Bureau; +91-22-61391533)
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