Agri Business

Global castor oil consumption to dip amid shrinking economies

Rutam Vora Ahmedabad | Updated on June 19, 2020 Published on June 19, 2020

India may see reduced sowing this year as competing crops give better returns

The economic gloom triggered by Covid-19 will impact the global castor oil and derivatives consumption during the year.

Global experts fear the demand for castor oil and derivatives will remain below normal in key markets such as the US and China giving a grim picture for the castor sector in India.

At a webinar on Global Castor Perspective organised by the Solvent Extractors' Association of India (SEA), stakeholders including buyers, processors and suppliers of castor oil and derivatives products highlighted the uncertainties lying ahead for the sector as large economies such as the US, Europe and China give strong signs of recession.

Ravi Singh Shaheed, Director - ACME-Hardesty Co, USA, informed that the US economy is passing through its worst phase since the Great Depression and that the US economy may contract by about 5.2 per cent in 2020 after witnessing a three per cent growth last year.

“We expect castor oil demand to be below normal by about 10-15 per cent. Volatile pricing has high potential to further impede demand and limit new growth. The next three months will give us some clarity, but we need to see how the September-December period will pan out,” Shaheed said.

Castor imports to the US has remained at average 76,000 tonnes per annum over the past few years.

China imports down

Giving an overview of China’s post-Covid revival outlook on demand for castor oil, Vivian Patel from Hengshui Jinghua Chemical Co Ltd, informed that Chinese imports of castor oil during January-May period has been going down. She mentioned that while the Chinese government’s economic stimulus packages may boost some domestic demand to revive the economy, castor oil imports in China could be lower by about 12 per cent this year.

Per the available data, during January-May 2018, China imported 1,44,374 tonnes of castor oil, which fell by 26 per cent to 1,07,124 tonnes for the same period in 2019. The imports subsequently declined further by 12 per cent to 94,716 tonnes owing to the global economic downturn and the pandemic.

Europe stable

However, European market appeared promising with demand for castor oil expected to remain more-or-less stable. “Europe will be the bright spot for castor oil and derivatives. The demand may not contract beyond 5 per cent. This points at a relatively stable economic condition for Europe,” said Thomas Baur, Head of Sales Architectural Dispersions and Oils at Alberdingk Boley GmbH, Germany.

India, the world’s castor oil supplier, may see consumption to dip by up to 20 per cent as key consuming sectors such as automobiles, plastics, lubes, paints are tightly gripped into recession this year. “Overall consumption could be lower by 20 per cent and export of castor oil derivatives is likely to be lower by 10 per cent from last year. Consumers are approaching the season by lower inventory. Also, we are not hearing very encouraging numbers on sowing. This again portrays a gloomy outlook in the short run. But the long-term horizon appears positive,” said Abhay Udeshi, Chairman, Jayant Agro-Organics Limited.

Udeshi also stated that lower crude oil prices in recent months has also added an element of competition for castor oil in consumption sectors.

Output, production

India’s castor output is estimated at 1.96 million tonnes (mt) for the year 2019-20, which is higher from 1.08 mt recorded in the previous year. Seed availability is expected to be 2.2 mt including the carry-over stock of 0.25 mt.

Commenting on the Indian Castor Oil Supply & Export Scenario 2020, Shailesh Baldha, General Manager - Adani Wilmar Limited, stated that many farmers have moved to stock seeds due to lower market prices. “The arrival pattern this year should be little different than normally. Normally 50 per cent of the crop arrives before peak period of June. Lower realisation this year would not help castor sowing as farmers are attracted by good prices of competing crops such as peanut, cotton and other crops. Prices of these crops are reasonably high, which would make castor at disadvantage as compared to previous year,” said Baldha hinting at a lower sowing of the oilseed.

Published on June 19, 2020
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