Castor seed price likely to rise after April due to demand-supply gap

Ravindra V Rao

Since the beginning of this year, the non-edible oilseed, castor, has been trading in a narrow range. It was one of the farm commodities that had been hit by scanty rainfall in 2018 and had thus led the agri commodity price gainers’ list last year.

The price surge was chiefly on concerns that lower production of castor seed in the 2018-19 season would worsen the castor oil balance-sheet further, already shaky due to lower stocks.

India enjoys a monopoly in global castor-oil exports and thus grows the long-duration crop, castor seed, for commercial purpose. Sowing of this 7-8 month crop is done in July-August, with harvesting by January-February and the arrival period extending to April-May. Thus, castor seed prices are generally under pressure during the arrival period; however, the extent of losses is determined by the broader fundamental factors.

In the present context, all-India castor seed arrivals were 55-60 thousand bags (1 bag=75 kg), averaging around 48 thousand bags in February. In March, arrivals may cross 1 lakh bags. The peak arrival period would extend till April this year unlike last year when supply pressure continued till May. This is mainly due to lower output in 2018-19 season.

In the largest castor seed growing state, Gujarat (80 percent of Indian castor-seed production), acreage is reported 9.7 percent lower while yield is likely to decline around 13.7 percent due to scanty rainfall.

The all-India 2018-19 castor-seed production is expected to drop to 11.26 lakh tonnes down from last year’s 14.16 lakh tonnes.

On the trade front, Indian castor-oil exports may decline in 2019 due to lower availability for crushing. Exports surged to a record 6.5 lakh tonnes in FY17-18 while, for April-December FY18-19, Indian exports plunged 18 percent from the same period a year ago to 4.31 lakh tonnes.

Taking into account the carried forward stocks and this year’s production, castor seed available for crushing may be around 14 lakh tonnes this season, much lower than last year.

The demand-supply gap clearly depicts higher prices of castor seed and oil, after April. Nevertheless, being largely an exported commodity, the currency factor would play a crucial role in determining exports and, thereby, prices of castor seed.

The author is Head – Commodity Research & Advisory at Anand Rathi Shares and Stock Brokers.

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