The Hindu Business Line : Castorseed futures could continue to be bearish

A grip of facts
Inflows likely to continue till May-end.
Export demand is restricted as shippers have ample stocks.
Carryover stocks projected to be over one lakh tonnes.

NOTHING TO SHOW OFF: Growers have not much to cheer as castorseed prices are on the decline. - A file photo.

Mumbai , April 16

The bearish phase in the castorseed futures market, being witnessed in the last few days, is likely to continue in the short term. This is in view of fears of supply exceeding demand, especially on inflows from Gujarat.

The daily inflows at the various mandies of Gujarat, a major castor producer in the country, have increased to 90,000 bags.

A good castor crop is forecast this season (October 2005-September 2006) with area under the crop rising by 11 per cent to 8.73 lakh hectares compared with last year.

Inflow to continue

"Inflow into various markets of Gujarat is expected to continue until end of May," an Ahmedabad-based trader said.

Supplies at the various market yards, especially in North Gujarat, have increased but export demand remains restricted.

"Shippers are well covered and they have stocks till May. The key is fresh demand from overseas market," a castor oil exporter said.

In view of this, prices have seen some sharp fall.

DIP IN PRICES

Castorseed June contracts prices on the Bombay Commodity Exchange (BCE) declined Rs 50 to Rs 1,588 a quintal during the weekend from Rs 1,641 a quintal on March 23.

Castorseed June contracts prices on the Ahmedabad Commodity Exchange (ACE) were down Rs 140 to Rs 1,576 for 100 kg from Rs 1,716 on March 1. While June contracts prices on the Rajkot Oilseeds Exchange were down Rs 100 to Rs 1,576 for 100 kg from Rs 1,675 on March 3.

Castor seed spot prices were down Rs 35 at Rs 1,475 a quintal from Rs 1,510 per quintal on March 3, 2006 on reports of increased supply in Gujarat.

Castor commercial grade prices were down Rs 8 at Rs 325 for 10 kg from Rs 333 on March 2.

Castor oil First Special Grade (FSG) prices at Kandla port slid Rs 16 to Rs 318 from Rs 334 for 10 kg on March 2.

EXPORT SCENARIO

Exports of castor oil during the 2005-06 fiscal have been estimated to have declined by a 13-14 per cent over previous year.

"Total exports may touch 1.80 lakh tonnes for FY 2005-06, down from actual 2.08 lakh tonnes in 2004-05," the castor oil export said.

Exports for the first two months (April-May) of FY 2006-07 are expected to be around 35,000-38,000 tonnes.

Currently, export prices are around $735-745 a tonne on f.o.b Kandla port.

If China enters the Indian market as a buyer, castor oil prices may gain some ground. However, export prospects are good in the long term as India is the only major supplier of castor oil in the world market.

CARRYOVER STOCKS

"Overall supply of castor oil in the country is good and the season may end with carryover stocks of nearly one lakh tonnes," another exporter said.

Total castor oil availability in the country would be around 4 lakh tonnes for season 2005-06 (October-September). Of which, exports may touch 2.50 lakh tonnes and domestic consumption would be around one lakh tonnes.

World production of castor oil is likely to touch 5.50 lakh tonnes in season 2005-06, up from 5.40 lakh tonnes last season.

With higher stocks at the start of this season, world supplies are likely to rise to 6.10 lakh tonnes. Castor oil prices came under pressure last year.

Prices declined sharply from $1,050 a tonne in January to $850 in January and have remained at this level also in the first three weeks of February, according to Oil World report.

World exports of castor oil reached a record 3.11-lakh tonnes during the 2004-05 season and are likely to decline to 3 lakh tonnes this season.

GLOBAL SEED STOCKS

World supplies are ample and world castor seed stocks will probably rise to around 1-1.20 lakh tonnes at the end of this season, most of which on account of India.

Global production of castor seed has reached a new record of 14 lakh tonnes during the current season, up from 13.3 lakh tonnes last season and an average production of 11.6 lakh tonnes in the preceding five years, according to Oil World.

The figure includes: India 9.10 lakh tonnes; China 2.50 lakh tonnes and Brazil at 1.70 lakh tonnes.

Total production of castorseed is estimated at 9.16 lakh tonnes, up by 12 per cent over previous season, according to the Solvent Extractors' Association (SEA).

Gujarat is estimated to produce 5.71 lakh tonnes, while among other major producing States, castor crop in Andhra Pradesh is expected around 1.64 lakh tonnes (up 17 per cent) over previous season due to increased yield in Nalgonda district, In Rajasthan, the output is estimated at 1.46 lakh tonnes. Other States may add 35,000 tonnes.

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