Mustard Seed Destined to Climb Higher on Increased Demand Prospects

Mustard seeds (Brassica Napus) also known as Rapeseeds and Canola are very widely cultivated throughout the world. The seeds can come from three different plants: black mustard, brown Indian mustard and white mustard. Mustard seed is the third leading source of vegetable oil in the world after Soybean oil and palm oil. It is world's second leading sources of protein meal after soybean meal. Mustard seeds oil content varies from 35 per cent to 46 per cent. It is the source of mustard seed oil and oilcake. Yellow colored oil is obtained by extraction process of the crushed mustard seeds. The pressed cakes of the seeds, left over after the production of oil are distilled to make De-Oil Cake, which serves as an animal feed. India's Mustard seed production in 2018-19 is estimated at around 86.93 lakh MT which is marginally higher from around 83.22 lakh MT produced in 2017-18. The top Mustard Seed producing states of the country are Rajasthan (47.26 per cent), Haryana (11.73 per cent), Madhya Pradesh (10.82 per cent), UttarPradesh (9.73 per cent), and West Bengal (6.69) respectively. As in 2018-19 the area under mustard seed in major growing states of Rajasthan and Haryana which are hub for Mustard has decreased by approximately 7 per cent, this is mainly because the area under pulses has increased over there, it is expected that the production may decrease by 3-4 per cent than last year.

State Wise Production of RM Seed in India (million MT)

Source: Directorate of Economics and Statistics, Department of Agriculture and Cooperation
*NBHC Estimates (2018-19)

International Scenario

The global RM seed scenario also expected to affect the prices in a big way. To measure the exact imports of the global factors, we can have a close watch at the global RM seed balance over the last decade. Overall the global production scenario is observed to be increasing for the past decade. The production for 2018-19, which was at 70.37 million MT has increased by 20.98 per cent from 2008-09. Likewise, the import grew by 37.83 per cent; consumption grew by 28.82 per cent and export 39.80 per cent. The positive fact about the RM seed trade is the growth in the consumption over the years and the consistent increase in the production. The production of RM seed has always maintained an upper hand over consumption. If this pattern of consumption (rate of growth) continues in the coming years, the prices are bound to maintain a steady uptrend as the supply is always going to lag behind the demand. The main pulling factor for the RM seed prices in the global market is the emerging trend in the oil and meal markets. The meal market has expanded significantly with its trade expanding by over 75 per cent similarly; the oil trade has also expanded significantly by over 65 per cent.The major contributors in production of Rapeseed and mustard are European Union, China, India and Canada.Globally it is expected that the market will remain stable in 2018-19 as compared with last year as production, Import, Export and the total domestic consumption is expected to increase on one hand but at the same time ending stock may decrease to 6.11 Million MT in 2018-19, from 6.88 MT in 2017-18.

The trade volume of both Rapeseed oil and meal in the year 2018-19 has increased globally over the years. United States is the largest importer of both Rapeseed oil and meal contributing to 41.75 and 54.57 per cent of global import volume respectively. Canada on the other hand is a major exporter of both Rapeseed oil and meal contributing to 65.08 and 75.66 per cent of global export volume respectively.

Global Rapeseed Balance Sheet (million MT)

Source: Foreign Agricultural Service, official USDA Estmates

Export Trends of Mustard Meal & Oil from India

The export of rapeseed meal is sharply increased to 897,537 (486,917) MT in first ten months, mainly exported to South Korea, Vietnam and Thailand. In the last 4 years the export of rapeseed meal and rapeseed seed oil has averaged to about 63.49 lakh MT and 28.74 lakh MT respectively. The export of Rapeseed oil and rapeseed meal has improved substantially for the country at 1,067,159. During the MY 2017-18, Rapeseedoil and meal export has recorded 17.77 per cent significantly decrease than last year and 209.28 per cent significantly increase than last year.

Export Trends of Mustard Meal & Oil from India (MT)

* April-Jan 2019
Source: The Solvent Extractors' Association of India

Recent Developments

Domestic

• India's Mustard seed production in 2018-19 is estimate at around 86.93 lakh MT, which is significantly higher from around 83.22 lakh MT produced in 2017-18, amidst support from the hike in MSP by Rs 200 to Rs 4,200 per quintal.
• Agriculture Canada's monthly supply and demand spreadsheet for December raised its forecast for year-end stocks to two million MT, compared to one million in the November forecast. Last year's stocks were 1.35 million MT.According to statistics Canada around 7.60 million MT of rapeseeds have been crushed by November this year and the oil produced was 3.34 million MT. The month of October 2017 saw 7.70 per cent increase in crushing of rapeseed and 10.26 per cent increase in production of rapeseed oil as compared to October 2016.

Price Trend Analysis

The rapeseed market price variation study indicates that the price volatility is on the rise since December 2018 owing to reports of higher seasonal demand. Looking at the seasonal trend Rapeseed prices tend to remain strong during the months of August through December amid the strong crush demand for seed during the festive season and slackening crop arrivals. Country wise, US has pushed China to second place to dominate the global import market of RM seed Oil with 41.75 per cent.While China Still remains the largest importer of Rapeseed contributing to 21.59 percent of global imports. Thus, with reports of shrinkage in production in India and enhancement of demand from China, Japan & EU, the global prices of rapeseed will find support from the current levels.The graph below depicts the price seasonality and prices of RM Seed at Alwar. The analysis reveals that the prices tend to peak in the month of January primarily due to increased festive demand from India & China. RM Seed prices have followed seasonal downtrend between March & July 2018, but since then have been on the downside with subdued movement, as the prospects of significant surge in edible oil imports into India has put pressure on the prices. The major factor which is likely to support the prices is the development in the retreating monsoon for the current season in 2018 and lower sowing. Rajasthan alone contributes to over 47.26 per cent of the RM Seed production. In Rajasthan, the sowing area has gone down by 7.12 per cent and retreating monsoon has increased significantly the number of districts with good moisture retention for Rabi season and it has been accordingly reflected in the estimated production figures. As per the price movement is concerned, the slight dip in the current couple of months has been in accordance with the seasonality. Overall, we can expect a bullish price movement to commence from mid-April and continue till the end of the oil year.