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Suresh P. Iyengar

Mumbai, June 29 The bullish undertone in castor seed futures is expected to continue as the arrivals may shrink further in the coming days. Castor seed is sown in July and August and harvested in January. The arrivals continue till mid-May.

The inflow into Gujarat spot markets has dropped to 30,000 bags (of 75 kg each) during the week from 80,000 bags. Prices of castor seed in the spot markets are on the rise amidst strong export demand and are quoted at about Rs 570 for a 20 kg bag. However, the price trend in 6-8 months will depend on sustaining export demand, exchange rate and sowing.

Export price of castor seed oil meal is quoted at $150 a tonne. With recent depreciation of rupee against dollar (about 8 per cent in last 2 months), exporters have earned better returns. India is one of largest exporters of castor seed and its derivatives like oil and oil meal. Exports of oil meals increased to 3.3 lakh tonnes in 2007-08 against 2.02 lakh tonnes logged last year. Castor oil exports touched about 1.76 lakh tonnes in 2007-08.

According to Solvent Extractors’ Association of India, the production in 2007-08 was about 9.09 lakh tonnes, an increase of 16 per cent. Sowing in Gujarat and Rajasthan will start in July and there are expectations that the area under castor cultivation is likely to increase due to better returns for farmers last year. However, prices may remain firm in the short to medium term as new crop arrivals will start only from December.

The weakness in barley futures is expected to continue in the short term. The steady fall in open interest and low volumes amidst softening prices indicate that the market is in overbought position.

The near-month July contract has hit an historic high recently. Taking the cues from strong demand from beer and poultry industry, prices have rallied in the last six months from Rs 950 per quintal to Rs 1,387 per quintal. The spot prices have doubled over the minimum support prices announced by the Government.

The bull run in prices continued even during the peak-arrival season as domestic manufacturers and stockiest build their inventory for future demand. There was also unconfirmed news on export enquiries from Gulf countries. With the stockiest all stocked up, the prices in the futures market are expected to correct lower. Last one week, the July contract has shed about 5 per cent to Rs 1,351 per quintal on Friday.

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