Rapeseed rules above MSP

Feed and fuel demand are holding prices up

Rapeseed is the world’s second largest oilseed crop after soyabean. From 62-64 million tonnes (mt) during 2010-11 and 2011-12, global production of rapeseed went up to 71 million tonnes in 2012-13 with significant contribution from Canada and the European Union. Other major origins include China and India, where it is a key crop too.

The crop is cultivated primarily for oil, used for food and fuel purposes. Rapeseed meal is a by-product of oil extraction and is used as animal feed. As seed and meal are largely consumed within each country, there aren’t large surpluses to be traded. World trade in the meal is relatively small at 6 mt and trade in the oil is about 4 mt.

In Canada, the crop is called canola, also known as ‘00’ variety (double zero variety) meaning zero erucic acid and glucocinolate. This new variety has helped to market the crop worldwide.

Domestic scene

In India, essentially a rabi season crop (planted in November and harvested in February/March), rapeseed/mustard contributes a quarter of the total oilseed production of 30 mt and 30 per cent of domestic vegetable oil production of 8 mt.

It is clear that there is no causal relationship between minimum support prices and actual domestic production. There may be a supply response to high open market prices, but not to changes in MSP.

Usually government and private trade estimates of production vary by a wide margin; but in case of rapeseed, a crop survey conducted by Solvent Extractors’ Association affirmed the government data.

Weighing on prices

As rapeseed has been trading 12-15 per cent above the MSP for several months, growers have reason to be happy. Going forward, two factors are likely to weigh on the market. One is that the world is expected to be awash with various agricultural commodities, including oilseeds such as soyabean, that would moderate prices of all oilseeds. Given that the Indian market is reasonably integrated with the world market through large import of vegetable oils, price pressures may be felt in the domestic market too.

At the same time, the south-west monsoon aberration is likely to hurt kharif crop production. So, for a directional change in rapeseed price the market will have to wait for about two months.

Rapeseed meal export shipments have been in the 8-12 lakh tonnes range in the last three years. With rising domestic consumption by livestock, the supply of this oilmeal may tighten unless production increases markedly.

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