Castor seed has witnessed a sharp bull run so far this year on lower output estimates following over a month’s delay in monsoon rains that resulted in lower acreage.
Prices have run up over 20% in the last six months.
Pre-season output forecast by research firm Agriwatch showed castor output at 1.55 million tonne this year after a record 1.83 million tonne recorded in the previous year. Trade sources, however, put the output figure between 1.0-1.1 million tonne, a multi-year low.
“Castor seed output is estimated to decline this year on late sowing,” said Sanjiv Sawla, managing director of M Lakshamsi & Co, a city based trader and exporter. Sawla said that speculators have taken full control of the castor seed market as they did in other commodities like guar gum, seed and chana in the past.
Lower output estimates have already spiked the prices. Data for castor seed spot prices compiled by National Commodity & Derivatives Exchange (NCDEX), shows it is up 21% from June. It is currently trading at Rs 4,724 per quintal in Disa mandi in Gujarat.
Also, the share of castor seeds to overall volumes on the NCDEX has gone up to 26%.
"We see its fair price around Rs 1,440 a maund of 20 kg (which translates into Rs 7,200 a quintal) which would go a long way in improving the economics of this crop, add to the much needed forex earnings of the country without affecting in any way the trade/export potential," said Magan Bhai Patel, President (Gujarat Region), Bhartiya Kisan Sangh.
Castor seed prices were subdued for over 10 months on surplus supplies. But now most processors and their importer counterparts don't seem to be well covered and the arrivals in the mandis have dried up, despite a surge in prices.
|Castor seed demand and supply (mn tonne)|
|Source : Agriwatch|
"Fresh international demand from buyers from China and Europe is seen during the last few weeks. Next two months are the most crucial demand months and with low arrivals at the mandis, we don’t see any price correction at least in the near future. With almost zero carry over this year and late arrival of fresh harvest the pressure is bound to sustain in the market and prices are expected to rally," said Manoj Kasliwal, managing director of Pumarth Commodities.
Meanwhile, castor seed is trading at a premium of 2.7% for delivery in March 2015, which provides a wonderful opportunity for arbitrageurs and hedgers to buy short and sell long. On the National Commodity & Derivatives Exchange (NCDEX), castor seed is quoted at Rs 4,795 a quintal for delivery in December, a gain of around 15% since September 15. Similarly, the oilseed for delivery in March 2015 is traded at Rs 4928 a quintal.
Interestingly, both volume and open interests have surged. While trading volume has jumped over 14 times to 71,640 lots today, open interest shot up over four times to 295,570 tonne on Monday from 61,220 tonne on September 15.
Derivatives of castor seed, castor meal and oil have also witnessed a sharp rise in prices. Castor meal jumped by 24% to Rs 7,500 a quintal while castor oil rose 19% to $1,515 a tonne so far this year.