Castor seed prices drop 12% on weak export demand

Castor seed prices have decreased by almost 12 per cent in the past one week as both export as well domestic demand have come down. At the futures market, castor seed price have been declining since Monday on profit booking.

At the spot market, castor price had reached to Rs 920-925 per 20 kg bag last Thursday. But soon after that, castor seed prices started declining as demand for export came down and now it is being traded at Rs 800-810 per 20 kg. Prices, therefore, have decreased nearly 12 per cent or Rs 110 per 20 kg in past one week.

On the National Commodity and Derivatives Exchange (NCDEX), the castor seed contract for February 2014 went down by about 16 percent during a week. NCDEX February contract was traded on Rs 4,248 per quintal on Friday while it closed on Rs 5,056 per quintal a week ago.

"Earlier this week, the futures witnessed a drastic sell off. The prices have fallen due to selling pressure and reluctance on the part of traders and exporters to buy at such high prices. Profit booking is seeping into the futures contracts even though the fundamentals still look strong", said Aasif Hirani, Director, Tradebulls Securities.

Delayed and lower sowing on account of unfavorable weather conditions has hampered production. Gujarat and Andhra Pradesh, the two largest castor growing states, witnessed shortage of rainfall during the sowing period. Globally too, castor supplies are likely to remain tight. Sowing area was lower this year by 35-40 per cent, coupled with decline in estimated yield due to inconsistencies in the monsoons in major growing regions.

Traders estimate total availability at 1.4 million tonnes this year, as compared with 2.4 million tonnes in the previous year. The crop sown in September is harvested through picking of seed in five-six trenches, the first of which begins in January.

A Rajkot-based castor broker said that, price of castor seed had gone up after first week of this month thanks to heavy export demand for castor oil. Moreover there was a report of lower production of castor seed which supported the price to move up.

Traders said, "Improvement in selling is also one of the reasons for negative trend in castor seed. Arrival of the seed has gained in past few days after price had increased."

In the first week of December, arrival of castor seed was about 32,000-35,000 bags in Gujarat which is now around 50,000-55,000 bags a day.