Performance Review of Commodity

Rapeseed-Mustard Seed

1. Background

a. Brief about the commodity such as sample picture, lifecycle and various varieties/grade of the
commodity found in India

Mustard seeds (Brassica Napus) also known as Rape,

Oilseed rape, Rapeseeds and Canola are very widely
cultivated throughout the world. Mustard seed is one of the
leading sources of vegetable oil in the world apart from
Soybean oil and palm oil. It is an important sources of protein
meal after soybean meal. Mustard seeds oil content varies
from 33% to 46% and average oil recovery is around 32% to
38%. After oil extraction, the remaining part of the seed is used
to produce rapeseed/mustard meal, an important source of
cattle and poultry feed. It is basically a winter crop and it
requires a temperate climate to prosper. The planting season
or the sowing period in India is during the Rabi season i.e. October to November. The crop starts flowering
in the months of November, December, January and February. The harvesting period is from late February
to March. Major producing states are Rajasthan, Uttar Pradesh, Haryana, Madhya Pradesh and Gujarat.

Crop Cycle (India)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Sowing Harvesting

Life Cycle: Major Varieties of Mustard and NCDEX Quality

Value Chain of the Commodity Specifications
Major Varieties
Solvent
Extracted
Solvent Plant
Oil
Rai, Ryada, Raya, Laha, Lahta, Toria, Tori,
Lahi, Brown-sarson, Bhoori- sarson, Yellow
Refinery sarson, Pilli sarson, Gobhi sarson, Karan rai,
De-oiled Duan, tera, tara, saundh, taramira
Cake
Mustard
Cake
NCDEX Quality Parameters
Animal Refined
Feed Oil
Moisture content 5% (basis)
Oil Content (at
Kolhu/Expeller Kachchi Consumer 5% moisture 42% (basis)
Ghani Oil content level):
FFA% 1.0 (max)
Foreign Matter 0.50% (basis)
Commission
Agent
Damaged or
Shriveled or 0.75% (max)
discolored seeds
Farmer Insect damaged Insect damaged matter
matter should be within 0.75%.

b. Commodity fundamentals and balance sheet as per the following format (to be prepared based on
publicly available information on best effort basis):

Table - Fundamentals & Balance sheet (quantity)

 (In Lakh Tonnes)
Previous FY Current FY
Global Scenario
(P)
Beginning Stocks 78.62 88.34
Production 724.14 682.38
Imports 143.21 147.95
Total Supply 945.97 918.67
Exports 142.98 149.97
Domestic Consumption 714.65 696.71
Ending Stocks 88.34 71.99
Source: USDA (April 2020); P= Provisional
Previous FY is 2018-19 and Current Year is 2019-20
(In Lakh Tonnes)
Previous FY Current FY
Indian Scenario
(P)
Beginning Stocks 3.69 4.69
Production 80.00 77.00
Imports 0.00 0.00
Total Supply 83.69 81.69
Exports 0.00 0.00
Domestic Consumption 79.00 80.00
Ending Stocks 4.69 1.69
Source: USDA (April 2020); P= Provisional
Previous FY is 2018-19 and Current Year is 2019-20
(In lakh Tonnes)
Top 10 Major Producing Countries Top 10 Major Consuming Countries
Rank
Country Previous FY Current FY Country Previous FY Current FY
1 Canada 203.43 190.00 European Union 245.00 233.25
2 European Union 200.33 170.00 China 169.25 156.50
3 China 132.81 131.00 Canada 96.92 102.00
4 India 80.00 77.00 India 79.00 79.50
5 Ukraine 28.50 33.65 Japan 24.11 24.25
6 Australia 21.80 23.00 United States 19.69 19.32
7 Russia 19.89 20.40 Russia 14.75 15.65
8 United States 16.44 15.53 Mexico 14.50 13.00
9 Belarus 4.56 5.78 Pakistan 10.65 12.55
10 Pakistan 2.70 4.10 Australia 10.16 8.31
Others 13.68 11.92 Others 30.62 32.38
World Total 724.14 682.38 World Total 684.03 664.33
Source: USDA (April 2020); Previous FY is 2018-19 and Current Year is 2019-20
Countries are arranged in descending order based on the figure in Current FY

(In Lakh Tonnes)

Rank Top 10 Major Exporting Countries Top 10 Major Importing Countries
Current
Country Previous FY Current FY Country Previous FY FY
1 Canada 92.02 93.00 European Union 42.32 58.00
2 Ukraine 24.93 30.00 China 34.86 25.00
3 Australia 15.32 17.00 Japan 23.84 24.00
4 Russia 5.59 5.30 Mexico 14.71 12.50
5 United States 1.81 1.80 Pakistan 8.06 8.00
6 Kazakhstan 1.28 1.25 UAE 5.03 7.25
7 Moldova 0.63 0.88 United States 5.57 5.45
8 EU 0.89 0.50 Belarus 3.37 2.25
9 Argentina 0.14 0.13 Bangladesh 2.33 2.00
10 Chile 0.07 0.07 Canada 1.46 1.50
Others 0.30 0.04 Others 1.66 2.00
World Total 142.98 149.97 World Total 143.21 147.95
Source: USDA (April 2020); Previous FY is 2018-19 and Current Year is 2019-20
Countries are arranged in descending order based on the figure in Current FY
 (In Lakh Tonnes)
Top 10 Major Producing States in India
Rank States Previous FY Current FY
1 Rajasthan 25.00 32.00
2 Uttar Pradesh 13.50 11.00
3 Madhya Pradesh 8.25 8.00
4 Punjab/Haryana 7.75 7.50
5 West Bengal 4.50 5.00
6 Gujarat 3.50 3.00
7 Eastern India & Others 8.50 8.50
Grand Total 71.00 75.00
Source: SEA, Previous FY is Oil Year 2017-18 and Current Year is Oil Year 2018-19
States are arranged in descending order based on the figure in Current FY
The share of Eastern India and other states (except for top 6 states) in total domestic production is only
around 10-12%.

c. Major changes in the polices governing trade in the spot markets of the commodity (FY 2019-20)

Date Major Policies governing trade and related changes

MSP for Rabi season 2019-20 increased by 5.36% to Rs 4425 per quintal as compare to Rs
23-Oct-19
4200 per quintal last year.
The Govt. exempted mandis, procurement agencies, farm operations, agri machinery hiring
27-Mar-20 centres as well as intra- and inter-state movement of farm implements from the country wide
lockdown rules.

d. Geo political issues in the commodity and its impact on Indian scenario (FY 2019-20)

Date Event Key Details Key Implications/Impact

On 3 January 2020, a United
Weakness in Energy
States drone strike near the Baghdad
Market also adversely
International Airport targeted and
03-Jan-20 US-Iran Tension impacted
killed one of the senior Iranian major
oilseeds/edible oil
general of the Islamic Revolutionary
market
Guard Corps.
World Trade with
China declared the
Outbreak of novel coronavirus (2019- China.
outbreak an
20-Jan-20 nCoV) that was first reported from Sentiments further
emergency about
Wuhan, China, on 31 December 2019. weakened in the
coronavirus attack.
markets
Indian Prime Minister addressed to the
Physical Market
nation on combating COVID-19 on
activities started getting
March 19, 2020. He urged Countrymen
19 Mar-20 adversely impacted due
Lockdown in Indian to observe JANTA CURFEW on
and to movement
States Sunday, that is on 22nd March. On 24
thereafter restrictions and
March 2020, Govt. ordered for
closures of physical
nationwide lockdown for 21 days
markets.
beginning from 25 March 2020.
2. Trading related parameter

a. Monthly and Annual traded volume (quantity in appropriate units)

Annual Traded Volume (MT)

Month Year Symbol Traded volume (MT) (April 19 to March 20)
662,750 6,650,540
Apr 2019 RMSEED
RMSEED 972,880
May 2019
RMSEED 577,540
Jun 2019
RMSEED 583,520
Jul 2019
RMSEED 607,160
Aug 2019
RMSEED 534,620
Sep 2019
RMSEED 509,330
Oct 2019
RMSEED 439,410
Nov 2019
RMSEED 418,820
Dec 2019
RMSEED 552,170
Jan 2020
RMSEED 372,960
Feb 2020
RMSEED 419,380
Mar 2020

b. Annual traded volume as proportion of total deliverable supply (quantity in appropriate units)

Symbol Traded Volume (MT) Deliverable Supply( MT) Proportion

RMSEED 6,650,540 8,782,000 75.73%

c. Annual traded volume as proportion of total annual production (quantity in appropriate units)

Symbol Traded volume (MT) Production( MT) Proportion

RMSEED 6,650,540 8,782,000 75.73%

d. Annual average Open interest as proportion of total production

Symbol Average Open Interest (MT) Production( MT) Proportion

RMSEED 68,632 8,782,000 0.78%

e. Annual average Open interest as proportion of total deliverable supply

Average Open Interest

Symbol (MT) Deliverable supply( MT) Proportion
RMSEED 68,632 8,782,000 0.78%

f. Monthly and Annual value of trade (in Rs. Crores)

 Annual Value of Trade
Month Years Symbol Traded Value (in Cr.) (In Cr.)
RMSEED 2,518 26,875
Apr 2019
RMSEED 3,782
May 2019
RMSEED 2,271
Jun 2019
RMSEED 2,296
Jul 2019
RMSEED 2,393
Aug 2019
RMSEED 2,124
Sep 2019
RMSEED 2,120
Oct 2019
RMSEED 1,882
Nov 2019
RMSEED 1,896
Dec 2019
RMSEED 2,416
Jan 2020
RMSEED 1,508
Feb 2020
RMSEED 1,669
Mar 2020

g. Monthly and Annual quantity of delivery (in appropriate units)

Annual quantity of
Expiry Month Years Symbol Total Delivery(MT) Delivery (MT)
RMSEED 5,550 48,790
Apr 2019
RMSEED 10,370
May 2019
RMSEED 9,830
Jun 2019
RMSEED 2,520
Jul 2019
RMSEED 3,480
Aug 2019
RMSEED 4,010
Sep 2019
RMSEED 3,360
Oct 2019
RMSEED 1,520
Nov 2019
RMSEED 2,680
Dec 2019
RMSEED 4,070
Jan 2020
RMSEED 1,400
Feb 2020
RMSEED 5,550
Mar 2020

h. Monthly and Annual value of delivery (in Rs. Crores)

 Annual value of
Expiry Month Years Symbol Value in Cr delivery (in Cr)
RMSEED 21 202
Apr 2019
RMSEED 41
May 2019
RMSEED 40
Jun 2019
RMSEED 10
Jul 2019
RMSEED 14
Aug 2019
RMSEED 17
Sep 2019
RMSEED 14
Oct 2019
RMSEED 7
Nov 2019
RMSEED 13
Dec 2019
RMSEED 18
Jan 2020
RMSEED 6
Feb 2020
RMSEED 21
Mar 2020

i. Monthly and Annual Average Open Interest (OI) (in appropriate units)

Month Years Symbol Average Open Interest (MT) Annual Open Interest (MT)
RMSEED 86,796 68,942
Apr 2019
RMSEED 120,616
May 2019
RMSEED 116,543
Jun 2019
RMSEED 102,219
Jul 2019
RMSEED 95,785
Aug 2019
RMSEED 88,361
Sep 2019
RMSEED 58,322
Oct 2019
RMSEED 43,830
Nov 2019
RMSEED 30,178
Dec 2019
RMSEED 29,990
Jan 2020
RMSEED 25,208
Feb 2020
RMSEED 29,462
Mar 2020

j. Annual average volume to open interest ratio

 Average of traded Average of Open Interest
Symbol volume(MT) (MT) Traded to Open interest
RMSEED 26,925 68,632 39.23%

k. Total number of unique members and clients who have traded during the financial year

Symbol Member Count Client Count

RMSEED 224 3,831

l. Ratio of open interest by FPOs/farmers/Hedge/VCP positions to total open interest (Annual average
as well as maximum daily value)

Annual average of ratio of open interest by FPOs/farmers/Hedge/VCP positions to total open interest
Symbol VCPs/ Hedger Proprietary traders Others
RMSEED 7.53% 39.03% 53.42%

Maximum daily value of ratio of open interest by FPOs/farmers/Hedge/VCP positions to total open interest

Symbol VCPs/ Hedger Proprietary traders Others

RMSEED 8.24% 33.70% 58.06%

*It is calculated on the day when commodity has highest open interest during the year.
*Commodity wise client categorization is as per category details as provided by the members.

m. Number of unique FPOs / farmers and VCPs/hedgers who traded in the financial year

Commodity Count
RMSEED 25
*Commodity wise client categorization is as per category details as provided by the members.

n. Algorithmic trading as percentage of total trading

Commodity %
RMSEED 4.70%

o. Delivery defaults

Number of instances 1
Quantity involved 20 MT
Value involved 0.08 Cr.

3. Price Movements
a. Comparison, correlation and ratio of standard deviation of Exchange futures price vis-à-vis international
futures price (wherever relevant comparable are available).

Correlation- 0.21
Standard Deviation- 1.07

Comparison:

Price Comparision
4900 500
4700
480
RM Seed Prices

Canola Prices
4500
4300 460
4100 440
3900
420
3700
3500 400

RM Seed Futures Price Canola (International Price)

b. Comparison, correlation and ratio of standard deviation of Exchange futures price vis-à-vis
international spot price (wherever relevant comparable are available) and domestic spot price
(exchange polled price).

NA

c. Correlation between exchange futures & domestic spot prices along with ratio of standard
deviation.

Correlation
Futures Spot Mandi
Futures 1
Spot 0.430431 1
Mandi -0.03434 0.099858 1

Standard Deviation
Futures Spot Mandi
Futures 1
Spot 0.430431 1
Mandi -0.03434 0.099858 1

d. Correlation between international futures & international spot prices along with ratio of standard
deviation (wherever relevant comparable are available).

Data not available

e. Comparison of Exchange polled price and mandi price (in case of agricultural commodities) / other
relevant price (in case non-agricultural commodities) at basis centre.

Price Comparison
5500 490

Internation Prices
480
5000
Indian Prices

470
4500 460
450
4000
440
3500 430
420
3000
410
2500 400

Futures Spot Mandi Canola

f. Maximum & Minimum value of daily futures price volatility and spot price volatility along with
disclosure of methodology adopted for computing the volatility. (Volatility calculated by Square root
of Standard Deviation of daily returns for the period from 1 April 2019 to 31 March 2020)

Value of daily futures price volatility (April 2019- March 2020)

Volatility Month Value

Mar 0.013550327
Max
Jul 0.00423846
Min

Value of daily Spot price volatility (April 2019- March 2020)

Volatility Month Value

Mar 0.006651321
Max
Aug 0.002044218
Min

g. Number of times the futures contract was in backwardation/ contango by more than 4% for the near month
contract in the period under review

No single instance futures contract was in backwardation / contango by more than 4% for the near month
contract in the period for April 2019- March 2020.

4. Others parameters

a. Qualitative and quantitative measure for Hedge effectiveness ratio and basis Risk (Volatility of Basis)
along with disclosure of methodology adopted for such calculations. (Volatility calculated by Square
root of Standard Deviation of daily returns for the period from 1 April 2019 to 31 March 2020)

Basis Volatility 0.263889

 Hedge Ratios Hedge Efficiency (in Percentage)
Period
Week 1-4 0.71 32

Week 5-8 0.54 41.86

Week 9-12 0.67 46.36

Week 13-16 0.83 -147.49

Week 17-20 0.82 34.51

Week 21-24 0.82 59.4

Week 25-28 0.94 44.8

Week 29-32 0.74 67.47

Week 33-36 0.62 -41.43

Week 37-40 0.53 -90.19

Week 41-44 0.48 41.3

Week 45-48 0.75 -6.1

RMSEED
100

50

0
1 2 3 4 5 6 7 8 9 10 11 12
-50

-100

-150

-200

The methodology for hedge efficiency ratio calculation is appended as Annexure 1.

b. Details about major physical markets of the commodity vis-à-vis market reach in terms of
availability of delivery centers (information to be provided state-wise and UT-wise).
 Major Trading Availability of exchange
State
Centers delivery centers

Alwar ADC
Ganganagar ADC
Bharatpur N.A.
Tonk ADC
Kota ADC
Hanumangarh
Rajasthan N.A.
Swai Madhopur
Baran
Dausa
Jaipur Basis
Bikaner ADC
Jodhpur ADC

Major Trading Availability of exchange

Centres delivery centers

Agra ADC
Gorakhpur
Aligarh
Badaun
Uttar Pradesh
Kanpur
Mathura N.A.
Hamirpur
Varanasi
Lalitpur
Hathras
Ghaziabad
Etah
 Major Trading Availability of exchange
Centers delivery centers

Bhind
Morena
Madhya Neemuch
Pradesh Mandsaur
Gwalior
N.A.
Satna
Katni
Shivpuri
Chhatarpur
Sheopur

Major Trading Availability of exchange

Centers delivery centers

Rewari
Bhiwani
Haryana
Sirsa
Hissar
N.A.
Fatehabad
Gurgaon
Others
Total

c. Details about major physical markets of the commodity and average Open Interest for each
month generated from those regions.

Note – The OI for each month is classified based on the Member level. The Average OI is on gross
level (Long OI + Short OI)

ANDHRA PRADESH (Avg

Month GUJARAT (Avg Qty (MT)) RAJASTHAN (Avg Qty(MT)
Qty (MT))
19-Apr 19,913 109,128 29,906
19-May 16,178 132,813 56,575
19-Jun 14,734 104,557 42,189
19-Jul 11,805 91,872 43,059
19-Aug 11,923 84,789 52,669
19-Sep 18,422 91,972 70,979
19-Oct 3,153 43,568 29,875
19-Nov 825 28,188 21,950
19-Dec 166 24,309 8,662
20-Jan 23 26,386 8,145
20-Feb 29 23,335 6,682
20-Mar 28 20,246 8,114
d. Details, such as number and target audience, of stakeholders’ awareness programs carried out by
the exchange.

Following list of Awareness programme, Stakeholder engagement programme has conducted for FY 2019-
20.

Sr. Programme Location Number of

Number Participants
1 IEP Jaipur 38
2 IEP Jodhpur 30
3 Awareness Programme Bikaner 40
4 Awareness Programme Udaipur 45
5 IEP Kasganj (Uttar 40
Pradesh)
6 Stakeholder Meet Jodhpur 50
7 Stakeholder Meet Shri Ganganagar 40

e. Steps taken / to be undertaken to improve hedging effectiveness of the contracts as well as to

improve the performance of illiquid contracts.

 Creating an awareness about the Hedge policy to bona fide hedger

 Awareness Programme in Major trading centres as well as remote location
 Attend the National as well as international conferences, Trade meets, seminars etc.
 One to one meeting with market participants and hedgers.

Annexure 1
Hedge Efficiency Analysis

Methodology

𝑉𝑎𝑟 (ℎ𝑒𝑑𝑔𝑒𝑑 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜)

𝐻𝑒𝑑𝑔𝑒 𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 = 1 −
𝑉𝑎𝑟 (𝑢𝑛ℎ𝑒𝑑𝑔𝑒𝑑 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜)

Unhedged portfolio is portfolio comprising of spot commodity, and hedged portfolio is a portfolio comprising
of spot commodity and short futures.

If there is no variance reduction, i.e.

𝑉𝑎𝑟 (ℎ𝑒𝑑𝑔𝑒𝑑 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜) = 𝑉𝑎𝑟 (𝑢𝑛ℎ𝑒𝑑𝑔𝑒𝑑 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜)

Then,
𝐻𝑒𝑑𝑔𝑒 𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 = 1 − 1 = 0

If spot is completely hedged using futures, then

𝑉𝑎𝑟 (ℎ𝑒𝑑𝑔𝑒𝑑 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜) = 0

𝐻𝑒𝑑𝑔𝑒 𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 = 1

Position is spot commodity and in futures is not initiated at 1:1. The fraction of position size in futures contract
to the position size in spot commodity is called ‘Hedge Ratio’.

So, in this analysis, we are calculating:

𝑉𝑎𝑟 (𝑠𝑝𝑜𝑡 𝑟𝑒𝑡𝑢𝑟𝑛 − ℎ𝑒𝑑𝑔𝑒 𝑟𝑎𝑡𝑖𝑜 ∗ 𝑓𝑢𝑡𝑢𝑟𝑒𝑠 𝑟𝑒𝑡𝑢𝑟𝑛)
𝐻𝑒𝑑𝑔𝑒 𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 = 1 −
𝑉𝑎𝑟 (𝑠𝑝𝑜𝑡 𝑟𝑒𝑡𝑢𝑟𝑛)

Weekly returns are used for the analysis. The hedge ratio is calculated based on previous 30 weeks’ data.
For example, for week 1 to week 4 of FY19-20, we use last 30 weeks’ data of FY18-19 to compute hedge
ratio which had highest hedge efficiency in those 30 weeks. This hedge ratio is then used to compute hedge
efficiency for Week 1 – Week 4 of FY 19-20. So, hedge ratio is derived from 30-week rolling basis.

Negative hedge efficiency imply variance has increased by taking position in futures contract. Some of this
can be attributed to the fact that spot price is not precisely available at the time of futures closing. So, the
timing of generation of these 2 data is different.