Speculators shift focus to castor futures

Chinese demand and low output drive castor oil prices to Rs 2,100 a tonne.

Castor oil prices have shot up as a result of speculative traders shifting their attention to the oil from cotton. A lower castor output, coupled with strong Chinese demand, has fuelled the prices further.

Castor oil, which was quoting around Rs 1,900 a quintal two months ago, has touched Rs 2,100 this month.

"Cotton traders, who roll their money in bullish markets, have now chosen castor futures, based on low expectations of lower production and rising demand Chinese buyers," said Harilal Chagganlal, a local castor oil trader.

The mandis have remained shut due to the rush to close the accounts with the financial year-end approaching. The data on arrivals would be clear only after they opened on April 2. The cotton traders were taking advantage of the situation and were taking up speculative positions, he added.

Adding fuel to the fire, a deficit of at least 2 lakh tonne of castor crop this year compared with the crop last year has led to the prices surging. The crop, which had touched 9.5 lakh tonne last year, is around 7.25 lakh tonne this year.

"Climatic changes with excess cold across the northern belt has damaged almost 30 per cent of the castor production in Rajasthan. The arrivals in marketing yards is also not keeping pace with the rising demand, creating severe shortage in supplies and further strengthening the prices," admitted Rajendra Pobaru, president of Rajkot Oil Seeds and Bullion Merchants Association.

The tung crop failure in China has led to the Chinese queuing up in the domestic castor oil market. The Chinese see castor oil as an ideal substitute for tung oil, mainly used for non-edible applications.

The entry of Chinese buyers has flared up the prices of castor oil in the global markets. In January, Chinese companies had indented for 4,500 mt of castor oil at a price of $970 a tonne. This indent follows a demand for 2,500 mt of the oil last December," said Chaganlal.

Two days ago, the Chinese companies offered to buy 1,250 mt castor oil at a price of $1,050 a tonne. The rise in prices of castor oil was because of a $300 a tonne increase in tung oil prices in China, he added.

The domestic prices of castor oil has also shot up from Rs 1,900 a quintal in early January to the current level of Rs 2,100.