Mustard prices seen falling below MSP on bumper crop prospects

By Sandip Das

As harvesting of mustard gathers momentum, farmers face the prospect of mandi prices falling below the Minimum Support Price (MSP) of Rs 5,450/quintal. Despite record harvest in this hub of oilseed trade, low prices may deprive farmers of remunerative income.

Farmer producer organisations (FPO) have therefore revived their demand for resumption of futures trade in the commodity.

Mandi prices of mustard are currently ruling around Rs 5,500/quintal and are set to fall below MSP to around Rs 5,000/quintal in the next couple of weeks, according to sources in the trade. Such prices will be the lowest in two years. The mandis prices in November last year was around Rs 7,500/quintal

Farmers are unwilling to hold stocks this year in anticipation of better prices later as the government has extended ban on futures and option trade of rapseed-mustard till December 2023 on commodity burse NCDEX thus depriving farmers a marketing avenue.

“This year we will purchase mustard from the farmers at a price close to MSP, yet we are not sure whether we could sell the oilseed later at a higher prices in the mandi,” Devraj Faujadar, CEO, Deeg wheat and mustard producer company, a farmer producer organistion (FPO), told FE.

The FPO with more than 810 share-holders, two years back sold mustard at Rs 6,500/quintal on the NCDEX platform which was around Rs 320/quintal more than the then mandi prices.

Faujdar said that this year also the FPC aims to provide remunerative prices higher than those prevailing at mandi besides providing farmers with the transportation of commodity after aggregation at the village level to mandi and testing of the oilseed for oil content.

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According to Roop Singh, CEO, Uttan Mustard Producers Company, a FPO based in Astavan village, while in the last two years the farmers have received remunerative prices which is reasonably more than MSP, this year’s record harvest is expected to hit farmers hard because of sharp fall in mandi prices.

“The ban on futures and option trade on commodity bourse has virtually put farmers at the mercy of traders at the mandis as there are at present no alternative marketing channels available,” Singh said.

Farmers grow mustard and wheat (mostly for self-consumption) in this region as rabi crops.

Ramchandra Choudhury, a farmer, said that mustard is the only cash crop which provides remunerative prices to farmers in this region while in kharif season, 80% of the agricultural land remains fallow because of lack of irrigation and only small quantity of millets such as jowar are grown.

In October, 2021, commodity and stock markets regulator SEBI had banned futures trading of rapseed-mustard trading to rein in inflation as mandi prices rose to a record Rs 8,300/quintal.

In December, 2021, SEBI banned futures trade on seven agricultural commodities including non-basmati paddy, wheat, chana and mustard seeds for one year which had been further extended by a year.

The agriculture ministry has estimated mustard seed production at a record 12.8 million tonne (MT) in the 2022-23 crop year (July-June). Area under mustard in the current rabi season has been reported at a record 9.8 million hectare (MH) which is 64% more than last five years’ average sown area of 6.4 MH. In the 2021-22 season, mustard sown areas stood at 9.1 MH.

Currently, Rajasthan (40%), Madhya Pradesh (14%), Uttar Pradesh (9%) and Haryana (7%), have 70% share in the country’s mustard seed production.

Meanwhile, the Solvent Extractors Association of India (SEA) has urged the government to raise import duties on edible oil, especially palm oil to a minimum of 20% immediately.

“Unbridled imports of palmolein is resulting in collapse of edible oil prices which is impacting marketing of mustard at peak harvest time and causing distress to farmers,” Ajay Jhuunjhunwala, president, SEA, said in a communication to the food ministry.

At present, crude palm, soyabean and sunflower oil imports attract only the 5% agri infra cess and a 10% education cess upon it, meaning a total tax incidence of 5.5%.

India imports about 56% of the total annual edible oil consumption of around 24 to 25 MT. Share of domestic edible oil includes mustard (40%), soyabean (24%) and groundnut (7%) and others.

This article has been republished from The Financial Express.