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Profit booking and selling pressure hurt mustard seeds |
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Mustard seed (RM seed) prices fell by nearly 12 per cent during May due to profit booking and fresh selling pressure. Earlier, an approximately 15 per cent price rise was seen during March and April due to aggressive buying by traders because of significant decline in production.
RM seed, which was trading in the range of Rs 4,150 per quintal during April, fell sharply to the level of Rs 3,650 by the end of May.
A major rise in price was due to the expectation of a decline in production this year as winter rains eluded the nation’s growing regions, hampering crop sowing. Concurrently, a shift to other remunerative crops further constrained rapeseed-mustard cultivation area expansion.
As per the third advance estimates released in April, the agriculture ministry pegged mustard output for financial year 2011-12 at 6.96 million tonnes, compared with the previous year’s production of 8.17 million tonnes and target of 8.193 million tonnes. India is self-sufficient in mustard seed and oil as import and export of the commodity is almost non-existent. However, India exports rapeseed oil meal. As per latest release from the Solvent Extractors’ Association of India, India’s total export of oil meals for FY2011-12 was reported at 5.5 lakh tonnes, compared with 5 lakh tonnes in FY2010-11, whereas export of rapeseed oil meal for FY2011-12 was reported at 1.71 lakh tonnes, compared with 0.93 lakh tonnes in FY2010-11, registering a gain of 84 per cent. Export of oil meals during April 2012 was reduced to 4 lakh tonnes, compared with 5.13 lakh tonnes in April 2011, down by 22 per cent, mainly due to disparity in crushing that resulted in lower availability for exports. For the same month in 2012, rapeseed oil meal exports were 0.43 lakh tonnes, compared with 1.42 lakh tonnes in April 2011.
Several factors added support to bears. First, oil meal exports fell by nearly 22 per cent and RM seed meal export fell by 70 per cent during April, compared with the same period last year due to lower crushing and sluggish demand.
“Higher prices of other oilseeds and edible oils due to firm overseas market due to supply shortage of oilseeds in the global market on account of prolonged dry weather conditions in South America (Argentina and Brazil) also provided support to prices,” said Badruddin Khan, AVP, research – commodities at Angel Broking.
Higher minimum support prices (MSP) also added bullish market sentiments. The government of India increased MSP to Rs 2,500 per quintal for this season, up 35 per cent from previous year’s price of Rs 1,850 per quintal, in order to protect RM seed producers.
In addition, NCDEX took several steps to curb excessive speculation in commodities that also kept a rein on the bulls. The most important step is the change in the delivery mechanism. Now, for RM seed “staggered delivery mechanism” will be followed. For contracts expiring from June, the staggered delivery period will start from fifth day of each month.
According to Prasoon Mathur, senior manager of retail research at Religare Broking, “The present step seems to be more effective in
controlling excessive speculation because the buyer will have to accept delivery after the start of the staggered delivery period if any seller intends to deliver. During the staggered delivery period, only those buyers are supposed to trade in the near-month contract who are ready to accept the delivery if it is given to them. Thus, speculators would certainly avoid taking long positions in the near month contract after the start of staggered delivery period.”
In India, mustard seed is basically a rabi crop. Its sowing starts in October and continues till end of December. Mustard seed is mainly grown in northwestern parts of India. Rajasthan and Uttar Pradesh are the major mustard seed producing states in the country. The other significant producers are Madhya Pradesh, Haryana, Gujarat, West Bengal and Assam.
“But, one should keep a close eye on the monsoon’s developments from this month, which plays a crucial role for kahrif crops like soybean, the key substitute of mustard seed. Lower availability of soybean in the short term, shall support sentiments over the near term, along with demand from the local stockists ahead of Ramzan,” says Vinita Advani, research analyst at Geojit Comtrade.
Source : mydigitalfc.com
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