The recent fall in Mustard seed prices in the global commodity markets was largely because of loss of trading exposure by participants in futures trading, traders said. Mustard seed contracts for shipping in May fell by Rs 14, or about 9.5 percent, to Rs 4,032 per quintal, according to data from the Commodity Futures Trading Commission (CFTC). The price of Mustard fell as the price of soybeans and other agricultural commodities. Futures trading is one of the largest contributors to the global market volatility. Soybeans and other grains contract for yield on a daily basis, which is about $5.5 billion a day.

Mustard contracts have been affected by the global weather conditions in India, and in addition to that the production of mustard seeds by the United States Department of Agriculture (USDA) has been suspended. The suspension of USDA’s marketing program on the basis of the weather conditions in India has resulted in lower crop production, the commodity experts said. The global food security issue has also been a major concern, especially with respect to rice and wheat, another said. Soybean and rice contracts were also affected by the suspension, and now the price of these commodities has risen. The global cocoa bean and coffee bean markets are in flux, with analysts saying that the effects of hurricane Katrina may also have influenced the prices of cocoa beans and coffee. The suspension of USDA’s marketing program on the basis of weather conditions in India may result in lower production, and this will help price of these commodities, experts added.

The global supply chain for food grains, fruits, vegetables, meats, fish, dairy products and other agricultural produce contracted last year, putting pressure on the agricultural commodities markets, and causing prices to rise. Higher prices for the same products translate to higher profits for farmers, but experts warned that lower agricultural productivity will lead to lower wages and reduce profitability for consumers. With lower production and higher prices for agricultural products, companies will have to increase the price of seeds, per quintal, compared to the price of non-food grains. The increasing price of mustard seed is mainly due to the high level of demand for this product, as compared to other grains, the experts said.

Importers reported on Thursday that the wholesale prices of rice and maize in the United States have been increasing due to the global economic crisis. Past events have caused higher prices for per quintial of these commodities, but this trend is expected to reverse as the Indian economy begins to recover. On the other hand, the US commodity prices are increasing due to the rising demand for imported food. In India, the government has implemented the duty-free facility on many items, thereby reducing the import cost, but this facility has not reached to all sectors. In this case, the wholesale guar seed prices on Friday rose by Rs 2.3 on the US dollar, while wheat and maize touched new highs of Rs 3.5 and Rs 3.6 per quintial, respectively.

The fall in vegetable prices has led to the fall in the Mustard Seed prices as well. The main factor contributing to the fall in Mustard Seed prices is the increasing demand in India and the resulting reduction in supply in the United States. The falling export rates in the United States has led to a fall in the commodity export rates in India, which may reduce the competitiveness of Indian exporters in the global markets. This reduction in competitiveness leads to lower prices of many items in the domestic market. Thus, most of the players in the domestic markets have taken a hit in the last two trading sessions, and wholesale Mustard Seed prices on Friday rose by Rs 2.3 per quintial. The weakness in the export market and the inflow of import duties on items like sugar, steel and automobiles have reduced the demand for mustard seed, and hence, there is a continuous fall in the prices.

The fall in commodity prices is another reason why the Mustard Seed prices have fallen since last few weeks. There was a time when the BSE (Benign Ebstein Syndrome) was spreading over the country like a deadly virus, resulting in farmers’ suicide and food riots. However, the price fall since last few weeks has prevented these tragic situations from happening. The overall sentiment across the markets is that the monsoons are still on the upside for next couple of months. It is expected that the prices of agricultural products will fall further in coming weeks, as the monsoons continue to recede from the southern areas.