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Increased oil and meal demand to push RM seed prices higher.

Date: 07-08-2020
Subject: Increased oil and meal demand to push RM seed prices higher
Rape mustard seed is an edible rabi oilseed sown during the November-January period every year and harvested from February to April. Madhya Pradesh, Rajasthan and Haryana are the leading growers of the oilseed.

A good winter gives a good crop. Cooler temperatures with good amounts of water content in the soil improve the yield. Price also plays a critical role in determining the extent of sowing.

Higher prices are generally forecasted to increase sowing of RM seeds while lower prices can possibly lead to switching to other crops such as chana and wheat.

Usually, RM seed is grown on the same soil as soybean in the kharif season. Higher yields and production of soybean improves the nutritive value of the soil for the rabi sowing and harvesting of RM seed.

The RM seed oil is termed as premium vegetable oil in the domestic market compared to crude palm oil and refined soy oil. The waste left after the extraction of oil is called the rapeseed meal, which is exported to the global buyers or giving to cattle.

NCDEX mustard seed future price traded higher in July because of 5-10 percent drop in production in 2019-20 compared to 2018-19; which eventually led to supply tightness.

Farmers in various regions have been occupied with the sowing activities and a further rise in COVID-19 cases in the country led to lower arrivals in the Jaipur Mandi.

Continued buying by NAFED from farmers and local mandis supported the prices, eventually leading the basis (spot - active futures) to be positive and reported nearly Rs 150 per quintal till August 4.

By August 3, NCDEX mustard futures had closed higher by 8.26 percent at Rs 5,034 per quintal compared to Rs 4,650 on June 30.

For the month ahead, we expect NCDEX mustard seed futures to trade bullish as the domestic demand for rapeseed meal is higher during this time of the year.

Correspondingly, lower carry forwards stocks owing to lower production forecasts from last year (2019-20) are expected to support prices from the weaker zone.

Rapeseed mustard is selling above the MSP (Rs 4,425 per quintal) in the major markets and SEA of India could continue buying to support prices amid the prevailing lockdown situation.

Rapeseed oil prices could also find upside movement due to a rise in prices of crude palm and refined soy oils on an increase in domestic demand and exports.

Expectancy of rise in import duties in vegetable oil prices may also support RM seed prices in the coming month.

An expected rise in import duties of vegetable oils will also support RM prices in the coming month. The government is planning to hike import duties on palm and other edible oils as the country seeks to become self-reliant by boosting local oilseed production.

The Soybean Processors of India has also said that the Centre will hike vegetable oil duties to 45-50 percent as well.

We expect a bullish trend in NCDEX mustard September futures and prices can touch Rs 5,500 in the month ahead.

Source:- moneycontrol.com

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