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Agro-Products : Expeller Rapeseed - Mustard Seed Oil
Mustard/Rapeseed oil is the third largest edible oil produced in the world after Soy oil and Palm oil. At a production level of 13-14 million tons, it accounts for about 12% of the total World's edible oil production. However the export trade has come down, due to the dominance of other oils like palm and soya, which have become comparatively cheaper. The share has come down to almost 3% from the earlier figures of about 5% (of the total 30 million tons of edible oils traded in the export market annually). The production and consumption of this oil has been growing at the rate of 4.65% and 5.03% respectively (compound growth over the last decade). Canada is the major exporter of seed and oil. Other major producers like China, India and EU are large consumers themselves. On crushing rapeseed or mustard, oil and meal are obtained. The average oil recovery from the seed is about 33%. The remaining is obtained as cake, which is rich in proteins and is used as an animal feed ingredient.
Mustard oil, which is known for its pungency, is traditionally the most favoured oil in the major production tracts the world over. The Winnipeg Commodity Exchange in Canada has a futures exchange for canola (Canola is hybrid Rapeseed grown in Canada), which serves as a reference for its derivatives, oil and meal.
The Indian Scenario
Mustard/Rapeseed is traditionally the most important oil for the Northern, Central and Eastern parts of the country. The pungency of the oil considered is the major 'quality determining' factor. Therefore, the traditional millers producing unrefined oil are more favored by the consumers. Till date, refining of mustard oil was almost absent in the country. As a result, the sector was more unorganised when compared to the other edible oil sectors in the country. This resulted in rampant adulteration of the commodity in the country. However, with the occurrence of 'dropsy' in the country, Government of India issued the Edible Oil Packaging Order in 1998, which made packing of all oils sold in the retail sector mandatory. Now, refining is present in mustard oil too.
Rapeseed/Mustard is one of the major sources of oil and meal to India. It supplies over 1.5 million tons of oil and 3-3.2 million tons of meal.
Import of both refined and crude rapeseed oil is permitted into the country. The import duty on crude oil is 75%, while that on refined oil is 82%. The imports of mustard oil have drastically come down in the country from around 1.72 lakh tons in 1998-99 to just around 10,000 tons in 2001-02. There have been no imports of refined oil for the last few years due to the differential duty structure.
Rapeseed, from which oil is extracted, is a major Rabi crop (sown during October-November and harvested during February - March). Rajasthan and Uttar Pradesh are the major rapeseed producing States in the country. Together, they produce about 50% of the produce. The production from Rajasthan is highly monsoon dependent. The other significant producers are Madhya Pradesh, Haryana, Gujarat, West Bengal, Assam, Bihar, Punjab and Jammu and Kashmir.
Peak arrival period for the rapeseed into mandies is in these markets is March-May. Major portion of the commodity enters the regulated mandies and is purchased by oilseed crushers spread across Central and Northern India.
The prices in the country are largely dependent on the domestic production of mustard seed. The spot markets at Delhi and Hapur are the major trading centers, and the prices of these markets serve as 'reference'. Currently, mustard oil prices are ruling at Rs 52/kg (unrefined) and Rs 72/kg (refined). This year's price is a great deviation from the normal Rs 40-45/kg of mustard oil owing to high seed price induced by drastic reduction in the 2002-03 crop. Futures trading in mustard oil are also prevalent in some of the Exchanges across the country.
Being an important source of edible oil and feed meal to the country, mustard is undoubtedly the focus of Indian edible oil industry. The seasonal nature of the production of mustard seed and its high susceptibility to natural fallacies, wide consumption spread all through the year, the nature of the existing supply and value chain, the present dependence on the other edible oils and oilseeds traded in the country and abroad provides tremendous opportunity for 'trade' in this commodity. The ups and downs in production, arrivals in the mandi, international prices of other oilseeds and oils, heavy presence of speculators and stockists and the presence of a large unorganised crushing sector cause daily price volatility in prices.
Futures trading would provide a right tool for hedging the market-related risk for everyone in the value chain of the commodity- the producing farmers, processors, brokers, speculators, traders of other oils, etc. |
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