Mustard seed witnessed a sharp decline by more than 3% to settle at 5368 levels

The mustard seed market witnessed a sharp decline in the past week, as prices fell by more than 3% to settle at 5368 levels. This was mainly due to the bearish factors of higher carryforward stock, bumper crops, increased arrivals, and higher edible oil imports. The carryforward stock of mustard seed is estimated to be in the range of 2.2-2.5 million metric tonnes (MMT), which is higher than the normal level of 1.5-1.8 MMT. The current crop size is also projected to be higher than last year, as favorable weather conditions and higher acreage boosted the yield and output. According to various sources, the mustard crop is estimated to be at 12 MMT vs 11 MMT last year, while the government estimate is 12.82 MMT. The arrivals of mustard seed in the mandis have also picked up the pace, as farmers are eager to sell their produce at the prevailing prices. The daily arrivals were reported to be 0.825 million bags on April 23rd, 2023, slightly lower than 0.9 million bags a day ago, but still on a rising trend. The higher availability of mustard seed has put pressure on the prices, as the demand from millers and crushers has not been able to match the supply. Moreover, edible oil imports have also increased significantly in the current oil year (November-October), as India imported 5.89 MMT of edible oils in the first five months, up by 25.5% year-on-year. The higher imports have resulted in higher stocks of edible oils at ports and pipelines, which has reduced the domestic demand for oilseeds like mustard and soybean.

However, the downside in mustard seed prices is seen to be limited by some supportive factors, such as government procurement, strong demand from millers, and positive crush margins. The government has decided to procure 1.5 MMT of mustard from farmers in Rajasthan, the largest producing state (40%-45%) of mustard in India, while HAFED will procure 20,000 MT at MSP in the mandis. This will provide some support to the farmers and prevent distress selling. NAFED has reported that, as of April 21st, 2023, a total of 2.57 lakh metric tonnes of mustard have been procured in four states, namely Haryana, Madhya Pradesh, Gujarat, and Rajasthan. The demand from millers and crushers is also expected to remain strong, as they are enjoying positive crush margins of mustard and soybean. Positive margins indicate that crushing oilseeds is profitable for millers and crushers, and hence they will continue to buy oilseeds from the market.

In conclusion, the mustard seed market is facing a mixed scenario of bearish and bullish factors, which are likely to keep the prices volatile in the near term. The higher carryforward stock, bumper crop, increased arrivals, and higher edible oil imports are weighing on the prices, while the government procurement, strong demand from millers, and positive crush margins are providing some support. The market participants should keep a close watch on these factors and trade accordingly.