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Lower output to support castor seed price this season

Castor oil and meal export remained subdued during the current marketing year.

ET CONTRIBUTORS|
Jan 13, 2019, 12.10 PM IST
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Castor oil and meal export remained subdued during the current marketing year.
Castor futures touched all-time high on concern about castor output cut by about 20-25% in Gujarat due to deficient monsoon rains in major castor growing districts of North Gujarat and Kutch.

In November, castor futures on National Commodities and Derivative Exchange (NCDEX) touched 6,300 rupees per 100 kg but soon started to correct as market participants’ book profits due to declining exports of castor derivatives.

Moreover, expectation of improved output in Gujarat due to ensure irrigation through canal by the state government also pressurized prices. It slipped more than 22% in next 6-weeks.


Despite, lower production prospects in Gujarat, the castor prices traded under pressure in last two month as export demand for meal and oil were not encouraging. Exports of Castor meal down more than 65.5% in 2018-19 while castor oil exports short by 12.5% on year.

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However, in the first week of New Year, the most active NCDEX castor seed futures for February delivery recovered from 10-week low on anticipation that the dry weather in Gujarat cut yield potential for castor seed in the state.

In its second advance estimate, Gujarat State Agriculture department, cut production forecast by 11% to 10.43 lakh tonnes compared to its earlier forecast in September 2018. The yield was cut to 1,562 kgs per ha from over 2,100 in first estimate. However, castor area in the state increased to 6.68 lakh ha from 5.50 lakh ha forecast earlier.

Gujarat is the largest castor seed producing state account for 70% area and 86% production in the country during 2017-18 followed by Rajasthan and Andhra Pradesh.

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Area up but production down

Castor area, according to Agriculture Ministry, forecast at 8.59 lakh ha in 2018-19 in its first advance estimate, up 5.2% on year, due to a sharp rise in area under the crop in Rajasthan.

As per the data, acreage in Rajasthan was at 264,400 ha, up 64.8% on year but acreage in Gujarat was predicted down by 11.8% on year to just over 5 lakh ha.

Against the production target of 18.31 lakh tonnes for castor seed, Ministry of Agriculture in its 1st Advance Estimates, forecast 15.17 lakh tonnes of castor seed production, down 17.2% in 2018-19. Last year, castor production was pegged at 15.68 lakh tonnes.

Disappointing Castor oil and meal exports

Castor oil and meal export remained subdued during the current marketing year.

Castor oil exports volumes down about 12% to 3.82-lakh tonnes year-on-year for the Apr-Nov 2018, compared to 4.36 lakh tonnes a year ago, according to data release by Solvent Extractor Association (SEA).

The main export destination for castor oil from the country is China followed by Netherlands, USA and France. These countries account for about 80% of total castor oil exports from the country during 2017/18.

Exports to China slowed down during Aug-Oct period as exports volume is down by more than 33% on year. China is the largest castor oil export destination from the Country accounts for over 44% of export volume.

In its latest SEA press release, castor meals exports during December 2018, provisionally reported at 10,664 tons, down more than 81% compared to 56,618 tons last year. The overall export during April to December 2018 is down by more than 65.5% at 2.88 lakh tons compared to 4.73 lakh tons during the same period of last year.

Top three export destinations of castor meal in 2018-19 season until December 2018 are South Korea (1.88 lakh tonnes), Vietnam (75,889 tonnes) and Japan (11,392 tonnes).

Castor meal exports to South Korea are down about 48% or 1.74 lakh tonnes compared to 3.62 lakh tonnes last year for same period. High export price for castor meal might be the reason for lower exports. In 2018-19 the average export price for castor meal is about 5780 rupees per tonnes, up from 4,860 during last year.

Outlook
Currently, castor seed futures is trending lower as per its seasonality pattern on arrival of new season castor seed in the physical market. Moreover, lower demand for meal exports during the first two months will put pressure on castor prices.

However, the prices may turn positive from April onwards on expectation of lower output and improved prospects of castor derivatives exports.

We expect the prices to bottom-out at around 5000/4950 levels (CMP: 5,280) in the first quarter due to peak arrival period and then trade towards Rs. 5,500/5,800 per quintal during the second quarter of 2019 on improved demand for crushing.

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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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