Farmers Can Earn More From Mustard by Making Oil, How Does the Model Work?

Farmers usually sell mustard soon after harvest, leaving processing and retail margins to other businesses. A new ICAR-documented FPO model shows another option. By processing mustard locally into edible oil and mustard cake, farmers can capture more value from the same crop and create a small rural enterprise.

The model is being run through Hodal Farmers’ Producer Company in Haryana. Farmers use a community oil expeller to process mustard produced by members. ICAR reports that one hectare producing 1,900 kg of mustard can generate about 785 litres of oil and 1,178 kg of mustard cake.

The reported gross revenue reaches about ₹1.56 lakh per hectare, while total costs are around ₹50,178. This leaves a net return of approximately ₹1.06 lakh. When farmers sell the same mustard as raw seed, the reported net return is about ₹58,500 per hectare.

Why Process Mustard Instead of Selling It?

The difference comes from value addition. Raw mustard is sold as a commodity, while processed mustard becomes two marketable products. Oil can be sold for human consumption and mustard cake can be marketed as livestock feed. This allows farmers to earn from more than one output.

ICAR estimates the oil recovery at around 37–38% under this model. The remaining material is not simply discarded. About 1,178 kg of mustard cake is produced from one hectare, creating another revenue stream for the enterprise.

The model also creates local employment because processing requires workers for handling, cleaning, pressing, packaging and marketing. Instead of sending raw mustard outside the village or district, some of the economic activity remains closer to the farms where the crop is produced.

This approach can be particularly useful for FPOs because individual farmers may not have enough capital or produce to justify purchasing processing equipment. A shared unit allows members to use common infrastructure while the FPO manages production, sales and other business activities.

Farmers should not begin by buying machinery. The first step should be identifying a reliable supply of mustard and potential buyers for both oil and mustard cake. The business becomes stronger when the FPO knows how much raw material is available and where finished products can be sold.

The FPO can then calculate the cost of an oil expeller, electricity, labour, packaging, maintenance and transport. These expenses should be compared with the expected value of oil and cake. The purpose is to determine whether processing actually creates enough additional income after all business costs.

Quality control is also important. Mustard needs proper cleaning before pressing. Storage conditions can affect seed quality, while poor handling can affect oil quality. If the FPO wants to sell packaged edible oil, it must also follow applicable food safety, labelling and packaging requirements.

FPOs Are Becoming Rural Businesses

The government says 10,000 FPOs have been formed under the central scheme for FPO formation and promotion. These organisations undertake activities including aggregation, trading, value addition, processing, seed production, digital commerce, custom hiring and export promotion.

As of July 31, 2026, FPOs formed under the central scheme had reported cumulative turnover of ₹20,358 crore. The figures show that many FPOs are moving beyond simply collecting farmers’ produce and are developing businesses around inputs, processing and marketing.

ICAR is also training FPOs to become more market-oriented. In September 2026, ICAR-IIMR conducted a programme for Uttar Pradesh FPOs covering processing, value addition, packaging, labelling, entrepreneurship and market development. The aim was to help organisations move from production and aggregation towards viable businesses.

Another ICAR programme in Kurnool focused on export readiness for FPOs. Participants were introduced to technologies for millet dehusking, onion storage, sheep hair shearing and mango seed processing. The programme also connected technology adoption with enterprise development and access to larger markets.

What Should Farmers Learn From This Model?

The mustard oil example does not mean every farmer should immediately start an oil business. Processing works only when raw material supply, machinery, quality, market demand and management come together. Farmers should first calculate their local costs and identify buyers before investing in equipment.

The biggest lesson is that farmers do not always need to produce more to increase income. They can sometimes earn more by changing what happens after harvest. Turning mustard into oil and livestock feed can create additional value without requiring farmers to increase their cultivated area.

For FPOs, this can become a practical business model. Members supply the crop, the organisation manages processing and the finished products can be sold through local markets, retailers or direct channels. The profits can then support the enterprise while creating better value realisation for participating farmers.

Farmers considering similar businesses should start small, test the market and maintain detailed accounts. A successful farm enterprise is not only about the selling price. It depends on the complete calculation of production, processing, packaging, transport, marketing and management costs.

The mustard oil model shows how a simple crop can support a larger rural business when farmers control more stages of the value chain. For FPOs with sufficient mustard production and access to markets, local processing could offer a practical way to turn farm produce into a higher-value product.