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Castor prices may see recovery on export demand

Castor seed prices, which had largely remained bullish last year since the commodity resumed trading at the exchange in January 2017, have been weakening since the beginning of this year. From the current low, market expects some recovery in the coming months due to export demand.

In January 2017, when castor started trading again on the exchanges after one year, prices were around Rs 3,800 per quintal. The opening price of the contract was Rs 3,851 per quintal on National Commodity and Derivatives Exchange and Rs 3,832 per quintal on Multi-Commodity Exchange.

Due to lesser acreage, the production had come down last year. Lower remuneration due to subdued prices in the previous year and good monsoon had made farmers to shift to other crops like groundnut, mustard and soybean. The production came down to 1.06 million tonnes. Production, in fact, has been dropping for the previous 5 years from 2.2 million tonnes in 2011-12.

Lesser supply saw castor seed pri­ces moving up even during the arrival season. Castor is sown in July-August, harvested in January and the crop arrives in the market between February and April. By April last year, prices had touched Rs 5,000 per quintal, said Ritesh Kumar Sahu, analyst, agri commodities, Angel Commodities.

At those high levels, the export demand started diminishing and hence prices corrected to Rs 4,500 per quintal. But for the remaining months, prices remained steady due to lower supply. But by December, prices started falling, as this year’s crop was bigger than last year. Though the acreage has been around three per cent lesser, the yield was 37 per cent higher due to favourable climatic conditions and better seeds.

Better yield led to 35 per cent growth in production to 1.43 million tonnes this year. During the harvest and the arrival season, prices have been declining. In December, castor seed prices stood at Rs 4,590 per quintal and they dropped to Rs 3,849 per quintal as on May 4.

Despite lower production in the previous years, export of castor oil has been growing year-after-year by an average 7 per cent. Castor oil has a wide variety of industrial usage, which includes manufacturing of medicines, soaps, cosmetics, and paints and as lubricants. It is also major source of bio-fuel.

The number of countries exporting castor oil from India too has been growing year-after-year. In 209-10, around 77 countries were buying castor oil from India and this went up to 88 by 2013-14 and further to 103 by 2017-18. India is the biggest exporter of the castor oil, accounting for 70 per cent of the total trade followed by China and Brazil. In 2017-18, the country exported around 620,000 tonnes of castor oil, which was 11.5 per cent higher than last year.

Castor meal exports too have grown by 42 per cent to 573,000 tonnes in 2017-18, as per the latest export data from the Solvent Extractors’ Association of India. The rise in meal exports has been primarily attributed to pick up in demand from South Korea, the largest importer of castor meal from India. About 82 per cent of India’s castor meal is exported to South Korea. Other key importers are the Taiwan, Japan and France.

Higher availability and lower prices are expected to increase demand for castor oil and meal in the international market in the coming months as well. This will support a recovery in prices. “By July-August prices may recover to Rs 4,300 per quintal and further by December they could bounce back to last year’s level of Rs 4,500 per quintal,” says Sahu.

sangeethag@mydigitalfc.com

Columnist: 
Sangeetha G.