Mustard farmers in India may get prices much higher than MSP, thanks to Russian invasion of Ukraine

The Russian invasion of Ukraine has led to a rise in the prices of several commodities including crude oil and the trend is likely to continue. However, the course of events is likely to benefit mustard farmers substantially.

In fact, India is a large importer of edible oils. Large quantities of sunflower oil are imported from Ukraine. A disruption in imports due to the war may lead to a rise in edible oil prices in the days to come. As a result, mustard farmers in India are likely to realize good prices. Experts say that the farmers may get mustard prices substantially higher than the Minimum Support Price (MSP), which has been fixed at Rs 5,050 per quintal for mustard and rapeseed for the marketing season 2022-23. Mustard is already trading in the market at prices way above the MSP. 

Thanks to the current global developments, the government’s control on edible oil prices may be in for a shock. The situation is one in which edible oil prices are likely to witness upward price pressure.

Russia has invaded Ukraine at a time when mustard harvesting is due in India. According to the Second Advance Estimates of the Ministry of Agriculture, the total oilseeds production in the country will be 371.5 lakh tonnes (lt) in 2021-22. This is 12 lt above the 359.5 lt produced in 2020-21. The mustard and rapeseed production in the country is estimated to be 114.59 lt in 2021-22 as against the target of 101.97 lt. The sunflower production is expected to be 2.66 lt as against the target of 3.14 lt.

India consumes around 25 lt of sunflower oil annually. That makes it the fourth-most consumed edible oil, after palm, soyabean and mustard/rapeseed. But India hardly produces 50,000 tonnes of sunflower oil. The rest of its need is fulfilled through imports. The palm oil consumption in the country is about 80 lt per annum, that of soyabean oil 45 lt and mustard/rapeseed 30 lt.

Atul Chaturvedi, president of the Solvent Extractors’ Association (SEA), said to RuralVoice, “Every month about 2.25 lt of sunflower oil is imported from Ukraine. This import is done through the Black Sea ports, where the Russian army is deployed at present. Even otherwise, one does not expect imports from a war-infested Ukraine as of now. The insurance premiums of ships also go up too high in such situations.”

According to Chaturvedi, importing from Russia, too, will be a problem because the sanctions from the US and western countries will lead to difficulties in the opening of LC. He said that sunflower oil is imported from Argentina, too, but the quantity is very small. Argentina cannot become a substitute for Ukraine. He said, “This situation may be called good for the Indian mustard farmers because they are likely to get prices much higher than MSP.” The MSP for mustard is Rs 5,050 per quintal while it is currently trading at more than Rs 6,700 per quintal in the mandis of Rajasthan.

According to Commerce Ministry data, the country’s sunflower oil imports totalled 25 lt in 2019-20. In 2020-21, the imports stood at 22 lt. The imports were valued at $1.89bn and $1.96bn respectively. Ukraine accounted for 19.3 lt of imports in 2019-20 and 17.4 lt in 2020-21. During this period, sunflower oil imports from Russia stood at 3.8 lt and 2.8 lt respectively. Some quantities were also imported from Argentina — 1.7 lt in 2019-20 and 1.4 lt in 2020-21.

However, sunflower oil prices had begun to rise even before the Russian invasion. On February 23, the landed price of imported crude sunflower oil in Mumbai was $1,630 per tonne. This price was about $1,500 per tonne a week ago and about $1,400 a year ago.

Other edible oil prices, too, have started moving up along with sunflower oil. The imported price of palm oil was $1,810 per tonne in Mumbai and that of soyabean oil $1,777 per tonne. These prices were about $1,545 and $1,625 respectively a week ago and about $1,090 and $1,125 a year ago.