Castor prices halve in a year of record production

Industry expects production to rise 35-40% from the previous year

Having seen a bull run last year, castor seed prices have witnessed a sharp correction over the past year due to record production and weak overseas demand. The price of castor oil, too, has faced a sharp fall from its peak levels last year.

The prices have showed some recovery over the past two weeks. But, experts see this recovery as short-lived, as weak export demand is likely to keep prices under pressure.

According to estimates of the state agriculture department, the area under castor in Gujarat jumped from 518,000 hectares in 2010-11 to about 811,000 hectares in 2011-12. Nationally, castor sowing was higher by around 390,000 hectares to about 1.27 million hectares in 2011-12, from 882,000 in 2010-11.
 

THE SLIP SHOWS
Date	Castor FSG Rs/10 kg	Castor seeds Rs/qtl
Feb 11, 2011 (High)	1,240	6,000
25-Jun-11	1,027	4,935
2-Jan-12	840	4,000
1-Jun-12	673	3,165
Jun 9, 2012 (Low)	625	2,925
26-Jun-12	703	3,315
% chg from high	-43.31	-44.75
Source:Bombay Commodity Exchange

Industry insiders estimate a total castor production of about 1.7 to 1.75 million tonnes (mt) in India, higher by about 500,000 tonnes from the last year.

“A bumper castor crop this oil year has increased the availability of the oilseed. This is pure demand-supply economics. Therefore, prices would remain under pressure till fresh demand comes up. But, if monsoon gets delayed, prices would rise further,” said an office bearer of the Solvent Extractors’ Association of India (SEA).

The castor crop cycle runs through January to May, while sowing starts from August-September. Arrivals at the Gujarat markets are about 50,000 to 70,000 bags (of 75 kg). Analysts say inventories would rise this year, pushing down prices further.

“Last year, there was less inventory and low production. Also, foreign buying was aggressive. Therefore, prices hit peak levels. This prompted more farmers to take up castor sowing, and it was sown on a record area. But, looking at the price trend this year, preliminary estimate suggests sowing may drop by about 20 per cent this year,” said Biren Vakil, chief executive officer of Paradigm Commodity Advisors in Ahmedabad.

Echoing similar sentiment, Sushil Goenka, president of SEA, said production of sesamum, soyabeans and castor was estimated to decline in 2012-13.

Added Vakil, “There is recovery in castor seed prices over the past two weeks. But due to record output of about 1.7 mt, overseas buyers are going slow on purchases. There could be pressure on prices.”

At the Bombay Commodities Exchange, castor seed prices quoted at Rs 3,315 per quintal on Tuesday, after recovering from its lowest levels of Rs 2,925 per quintal on June 9. Castor seed hit a high of Rs 6,000 per quintal on February 11, 2011. The prices are still lower by close to 45 per cent from its highs. Castor oil first special grade quoted at Rs 703 per 10 kg on Tuesday. The prices surged to a high of Rs 1,240 per 10 kg on February 11, 2011. On June 9, 2012, prices hit the bottom of Rs 625 per 10 kg.