Mumbai: Indian mustardseed futures are expected to trade higher and reach new highs this week on trailing rabi, or winter crop, acreage, and soaring international crude oil prices, analysts said.
“Sowing is in its fag end and area under the crop is still down sharply...prices will move up further on supply fears,” said Shardul Sharma, analyst, Sharekhan Commodities Pvt Ltd.
Area under rabi mustardseed crop was down 26% to 4.24 million hectares as on 23November, compared with the same period last year, farm ministry data showed.
“Sowing is likely to be completed in next two weeks and the area is not likely to increase significantly during the period,” said a senior official in the state department of agriculture, Rajasthan.
Rajasthan is a major producer of mustardseed and plantings in the state are down by around 35% as of now due to low moisture levels, the official said. Mustardseed sowing starts from October and the crop is ready for harvest by mid-February.
“The prices are likely to remain strong in both spot and futures in the next two three months as spot market will see a supply crunch before new arrivals,” Sharma said.
Arrivals have come down sharply in spot market, as traders and producers are holding stocks in expectation of higher prices by end of December, said a Sriganganagar-based trader.
In the last one month, spot prices of the commodity have risen around 6% in Jaipur, a major trading hub. The spot prices were ruling at Rs486 per 20 kg as per latest data.
Three analysts who spoke to Reuters expect the benchmark January contract on the National Commodity and Derivatives Exchange to stay above Rs500 levels. The contract has resistance at Rs502 level and a breach can push it to new highs, they said.
“International crude oil prices have reached new highs and are staying above $98 levels...it pushes the edible oil complex, including mustardseed, higher,” said Prasoon Mathur, an analyst with Religare Commodities Ltd.
Lower mustardseed output indicates higher edible oil import by India and an increase in edible oil prices. A higher crude oil price in the meantime indicates diversion of edible oil for biofuel production, boosting edible oil prices.