Slack demand pulls down castor seed spot prices

Prices dip to Rs 430-440 from Rs 570-580 per 20 kg.

After reaching a peak level in the year 2008, castor seed spot prices are now moving southwards. Sluggish demand in the export market has resulted into a sharp fall in the prices of castor seed. The prices have dipped by almost Rs. 100 per 20 kg in the past seven weeks.

According to traders spot prices of castor seed, which were ruling firm at Rs. 570-580 during November-2008, have dipped to Rs. 430 to Rs. 440 in Gujarat. "Global recession has led to a fall in demand in the overseas markets. Around 88 per cent of castor oil from India is exported to other countries. Similarly, castor meal demand has also gone down noticeably. This has contributed to reduction in castor seed prices," said BV Mehta, executive director, Solvent Extractors Association of India (SEA).

The supply of castor seed has increased following fresh arrivals of new crops. Currently, 25,000 to 35,000 bags are arriving in Gujarat.

"The exports contracts for December-January deliveries are being extended. Importers are trying to postpone the deliveries as the demand in overseas markets is weak due to ongoing recession", said Pravin Thakkar, president, Ahmedabad Commodity Exchange (ACE). "Castor oil also finds its application as lubricant and grease in auto industry. The demand from auto sector has also taken a beating amid global turmoil", he added.

Expectation of higher castor crop this year is also one of the causes for the sharp fall in the prices of the commodity.

While the supply is increasing on one hand, the local players are buying castor for their immediate requirement. As per market estimates, castor output, which stood around 9.1 lakh tonnes last year, is likely to be above 10 lakh tonnes this year. The castor output had grown by 16 per cent in 2007-08.

In the wake of sluggish demand in the international market, traders expect lower exports of castor oil and castor meals this year.