Lower output pushes castor prices up 21% this month

Hopes of good export demand for castor oil and meal fueled the rise

Prices of castor seed continue to surge on the back of lower production and expectation of good export demand for castor oil and meal in the coming months.

Seed prices have already reached a two-year high at the National Commodities and Derivatives Exchange (NCDEX) and physical markets. In the latter, seed prices have risen 21.3 per cent during March itself.

"The market has reacted on a lower production estimate and that's why seed prices have gone up sharply. However, it is just the beginning of fresh arrivals, which will increase in the coming days. This may put castor prices under pressure," said Haresh Vyas, managing director of Royal Castor Products.

Currently, about 90,000-100,000 bags (each 60 kg) of seed are coming to the markets, mainly in Gujarat. The price of the commodity is now Rs 4,830 a quintal. Last year at this time, it was Rs 4,100 a quintal, while the arrival was about 125,000 bags. At NCDEX, castor seed's most-active April contract gained Rs 189 or four per cent to Rs 4,925 a quintal on Friday.

"We expect futures prices to stay higher and they might cross Rs 5,000 a quintal, as the harvesting season is coming to an end," said Ritesh Kumar Sahu, an analyst at Angel Broking.

Last month, Junagadh Agriculture University (JAU) had recommended holding the seed and selling after May. Based on production and demand, its department of agricultural economics had forecast that castor prices would then go up.

JAU estimates the country's castor seed production at 1.45 million tonnes for 2016-17, as against 1.73 million tonnes the previous year. The Solvent Extractors' Association of India has estimated seed production to decline by 25 per cent, from 1.43 million tonnes in 2015-16 to 1.06 million tonnes in 2016-17.

M G Dhandhalya, an associate research scientist at JAU, said: "We need about 1.64 million tonnes of seed to match the export and domestic demand."

Farmers also understand that holding the crop will give them a better return, which has restricted the arrival of seed in the producing belt.