After foodgrains, oilseeds play an important role in Indian economy. Oilseed crops are important cash crops as they are a source of foreign exchange and raw material to many industries. They can be used in crop rotation along with pulses. While edible oils form an important part of the human diet, oilseed cakes are used to feed cattle.

Nine oilseeds are cultivated in the country and the major edible oilseeds are groundnut, rapeseed, sesamum, nigerseed, safflower, sunflower and soyabean whereas the other two non-edible oilseeds are linseed and castor seed. India’s share in global production usually ranges from 7-8 per cent. But the area under oilseeds cultivation has increased over time with production increasing by more than five per cent with each year registering a growth of more than one per cent.

Productivity low But the productivity is still low when compared to other oilseeds producing countries in the world. The main cause is low cultivation of oilseeds on account of switchover to other profitable crops and dependence on rainfall rather than on irrigation. Due to lower production, India imports pulses and oilseeds and also a significant portion of edible oil. To reduce dependency on imports and attain self-sufficiency, the Government has been striving with different action plans.

Oilseeds are renewable resources largely affected by weather conditions, crop production cycle and ongoing changes and fluctuation in global supplies and shifts in the markets. Usually every oilseed has its own demand-supply dynamics and a consequent change in demand-supply situation creates a trading and investment opportunity. Indian oilseeds are also influenced by global market sentiments. While all the oilseeds trade independently, as they are used in same food applications, they end up competing in the market with each other.

Commodity bourses Oilseeds are usually crushed to extract oil and meal. They are traded on the physical market and also on the futures markets. The physical market mainly comprises plants which procure oilseeds to crush, whereas the futures market consists of number of players as per their needs. Oilseeds are actively traded in a number of commodity exchanges. These exchanges play an important part as they safeguard the interest of farmers, stockists, exporters and others involved in the trading by providing a hedging platform in order to minimise risk of wide price fluctuations. These exchanges offer a complete basket of oil and oilseeds to trade and have been successful in building strong participation on account of liquidity and efficient price discovery mechanism. Electronic trading

Among the nine oilseeds produced in India, futures electronic trading is available in rapeseed, soyabean and castorseed. Soya oil and crude palm oil are also actively traded. Due to availability of electronic trading of oilseeds products, the commodity futures have seen some phenomenal growth in trading volume and interest. Oilseed trading in India has managed to make a prominent presence in the industry wherein the trading intercedes between buyers and sellers and facilitates decision related to storage and consumption thereby providing the much-needed liquidity and providing the investors to capitalise on opportunities. The trading market usually has various participants like hedgers, speculators and arbitrageurs. Hedgers play an important role in oilseeds trading as they are the participants who have the underlying risk of a commodity as they produce, consume or import and export. Hence oilseeds trading is an essential tool for traders and exporters, in order to protect themselves against price fluctuations.

The writer is Research Analyst, Geojit Comtrade Ltd. Views are personal.

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