Castor seed to remain bullish

Castor rates increased by 17% from Rs 4,100 per quintal to Rs 4,800 per quintal between June and September

Castor seed prices have been moving up since June due to estimates of lower production. With fundamentals continuing to support, prices are expected to move up further in the coming months.

Prices have been moving sideways with a negative bias since the beginning of the year till June. According to the agriculture ministry data, castor acreage across the country was 5.2 per cent up at 8,59,400 hectares this season due to a sharp rise in area under cultivation in Rajasthan.

As per the data, acreage in Rajasthan was 64.8 per cent up at 2,64,400 hectares, though acreage in Gujarat was down by 11.8 per cent at over 500,000 hectares. The decline in Gujarat was compensated by the rise in acreage in Rajasthan. Gujarat is the largest castor seed producing state accounting for 70 per cent area and 86 per cent production, followed by Rajasthan and Andhra Pradesh.

However, since June prices started moving up after the crop estimates were released. In its first advance estimates for 2018-19, the Gujarat agriculture department estimated castor crop to decline by 21 per cent to 1.173 million tonnes against 1.484 million tonnes last year, said Ritesh Kumar Sahu, fundamental analyst, agri commodities, Angel Broking.

Gujarat production forecast also affected the national production estimates. Against the production target of 1.831 million tonnes, the agriculture ministry in its first advance estimate predicted the production to be 1.517 million tonnes, down 17.2 per cent from last year. The country had produced 1.568 million tonnes of castor seed last year. Late arrival of monsoon rains in castor producing areas of Gujarat and Rajasthan also supported prices.

Between June and September, castor seed prices moved up by 17 per cent from Rs 4,100 per quintal to Rs 4,800 per quintal. But during August-September prices also remained stagnant for some time reacting to the export demand for castor oil and castor meal.

Between April and August, castor oil exports were down by more than 12 per cent at 239,000 tonnes. While castor oil exports to China went up by 12.3 per cent to 1,03,951 tonnes, that to the US, the Netherlands and France declined by 27.6 per cent, 15.35 per cent and 25.5 per cent, respectively. China is main export destination for Indian castor oil followed by the Netherlands, the US and France. The country had shipped around 639,000 tonnes of castor oil in 2017-18.

Castor meal exports too were down in the first half of 2018-19 – between April and September – by about 32 per cent at 2,02,407 tonnes against 2,99,271 tonnes during the same period last year. Castor meal export prices have been higher by average 40 per cent during the last two months against the same period last year. This affected the demand for castor meal. South Korea is the largest buyer of Indian castor meal, accounting for more than 75 per cent of exports, followed by Taiwan.

Going ahead, the export demand for both oil and meal are expected to go up as the market is expecting supplies to be tighter from the new crop. Anticipation of prices going up due to tighter supplies will also force exporters to shop early.

As far as prices are concerned, more upside is expected in the coming months. “With the expectation of lower crop production in Gujarat and increase in meal exports, we anticipate castor prices to trade positive in coming months. In the current season, the peak arrivals may delay by 15-30 days due to late arrival of monsoon rains. Moreover, drier climate in main castor producing districts of Banaskantha, Patan and Mehsana in Gujarat may affect castor crop yield. Hence, we expect the prices to move towards Rs 5,100-5,300 per quintal in short to medium term,” said Sahu.