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\After hitting a high of ₹6,264 a quintal recently in futures trades, castor seed prices have come under pressure as farmers and stockists decided to liquidate their stocks to ride the temporary spurt in prices.
On April 12, castor futures for the June 2019 contract on the National Commodity & Derivatives Exchange Ltd (NCDEX) hit an intra-day high of ₹6,318 a quintal before closing at ₹6,264 on April 12. Since then, the prices have been fluctuating with a negative bias. On Monday, NCDEX June Castor futures traded at ₹5,734 a quintal, down 1.17 per cent over the previous close.
“This is a hidden bear market. The simple trend is that the prices have corrected from the recent peak to about ₹5,700 now. Looking at the fundamentals and the crop outlook, it is important that the prices sustain above ₹6,000. But we are experiencing more than expected carryover stock and arrivals are hitting a record amid higher prices. This is affecting the prices,” said commodity analyst Biren Vakil of Paradigm Commodities in Ahmedabad.
Silver lining
However, exports of castor oil and derivatives show promise, indicating a possible upside in prices going forward.
“Exports are overall impressive. If we make a cumulative year-on-year comparision, exports are showing encouraging trends,” added Vakil.
The crop fundamentals support a bullish trend as the apex trade body, Solvent Extractors’ Association of India (SEA), has projected a decline in castor seed output at 10.6 lakh tonnes for 2018-19, down 25-30 per cent from the 14.16 lakh tonnes reported in the previous year.
The decline in crop is mainly on account of the drought conditions in the growing states of Gujarat, Rajasthan, Andhra Pradesh and Telangana.
“The crop estimate has been lowered from the earlier projection of 11.26 lakh tonnes to 10.6 lakh tonnes. There is now a demand-supply gap even if we factor-in the carryover stock of about 4.5 lakh tonnes.
Normally there is a requirement of about 16-17 lakh tonnes for crushing. So, we believe there is a deficit of about 2 lakh tonnes,” said BV Mehta, Executive Director, SEA.
However, the exact quantum of deficit can be known only by July when the season nears its end. “But currently, the arrivals are good and farmers are getting good prices for their produce. This has brightened the prospects for castor cultivation next year,” said Mehta.
Experts, however, see prices remaining range-bound at the current level of ₹5,700-5,800 a quintal in the near term, with a likelihood of breaching the historic levels of ₹6,200 in the long term as the season progresses towards its end.
Technical charts show a strength in castor prices. “Over the past two months we have seen a harmonic pattern getting developed in castor prices,” said Ajay Kedia of Mumbai-based Kedia Commodities.
“This pattern, which has about 90 per cent accuracy in indicating price trends, has settled at around ₹6,200. So, in the near term we see a bearish trend in the prices with a range of ₹5,300-6,200. But going long-term, we are bullish on castor.”
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