Mustard prices tumble under weight of heavy arrivals, cheap imported oil

Prices of mustard seed are tumbling because of bumper output and the availability of cheap imported edible oils, putting growers in stress when the new crop is being harvested.

Though the prices have recovered a bit since Wednesday over talk of some damage to the standing crop due to the heat wave, the pullback has been marginal.

To stem the fall, the Central government recently abolished the zero tariff import of two million tonnes of sunflower oil, which it had permitted during the crisis caused by the Russia-Ukraine war, but trade sources say it isn’t enough.

Earlier, a similar zero duty quota on the import of refined soybean oil was abolished.

The data sourced from various agencies shows mustard seed prices in the benchmark Jaipur market in Rajasthan have dropped almost 8 per cent in the past one month since February 1, while the arrivals have gone up almost 308 per cent during the same period.

The prices, according to trade sources, are ruling precariously close to the 2023-24 minimum support price (MSP) of Rs 5,450 per quintal and unless remedial measures are taken they could drop below the floor rate.

Mustard seed production in the 2023 rabi season is estimated to be around 12.81 million tonnes, according to the second advance estimate, up 7.11 per cent from last year.

“The Centre should immediately review the import duty on edible oils, and for palm oil, being the largest consumed edible oil in the country, its duty should be raised to 15-20 per cent,” B V Mehta, executive director of the Solvent Extractors Association of India (SEA), told Business Standard.

At present, the effective import duty on crude palm oil is around 5.5 per cent while that on refined palm oil is in the region of 13.75 per cent. The effective duty includes the agriculture and social welfare cess.

The SEA, in a memorandum to the food and commerce ministries sent a few days ago, suggested restricting the import of refined palm oil by putting the commodity in the restricted category.

It also suggested that government agencies like Nafed could begin the procurement of mustard at MSP.

Tarun Satsangi, who handles commodity research at Origo Commodities, in a research note said there was no halt to falling mustard seed prices in key domestic mandis like Alwar, Bharatpur, and Jaipur. Prices have lost about 15 per cent this year (from January 1, 2023, to February 28, 2023) and a corrective wave is still on, he added.

“Despite the fact that prices are at a 2-year low, we will not be surprised if in the coming weeks they fall to or below the MSP of Rs 5,450 per quintal before finding the season’s bottom. Later, prices will be in the sideways band the way soybean prices have been since November 2022 due to ample supply,” Satsangi said.

Listing the reasons for the drop in prices, Satsangi said carry-forward stocks for 2023-24 were seen at 2.2-2.5 million tonnes while crop production in 2023-24 is estimated to be at record over 12 million tonnes.

“Not only size but also the quality of a crop is in good to excellent condition,” he said.

That apart, he said farmers were not holding on to their produce unlike last year, which was why the pace of arrival in February was higher than last year.

According to Origo, cumulative mustard arrivals in February 2023 are 503,830 tonnes, which is almost 45 per cent higher than in the same period last year.