Lower output prediction pushes castor prices up by 21% this month

Prices of castor seeds continue to surge on the back of lower production and expectation of good export demand for castor oil and meal in the coming months.

Seed prices have already reached a two-year high at the National Commodities and Derivatives Exchange (NCDEX) and physical markets. In the latter, seed prices have risen by 21.3 per cent during March itself.

“The market has reacted on a lower production estimate and that’s why prices of seed have gone up sharply. However, it is just the beginning of fresh arrival and will increase in the coming days. This may pressurise castor prices,” said Haresh Vyas, managing director of Royal Castor Products.

Currently, 90,000-100,000 bags (each 60 kg) of seed are arriving in the markets, mainly in Gujarat. Prices of the commodity are now ~4,830 a quintal. Last year at this time, it was ~4,100 a quintal, while arrival was about 125,000 bags. At NCDEX, castor seed's most active April contract gained ~189 or four per cent to ~4,925 a quintal on Friday.

“We expect futures prices to stay higher and might cross ~5,000 a qtl, as the harvesting season is coming to an end,” said Ritesh Kumar Sahu, analyst at Angel Broking.

Last month, Junagadh Agriculture University (JAU) had recommended to hold the seed and sell after May. Based on production and demand, its department of agricultural economics had forecast that castor prices would then go up.

JAU estimates the country’s castor seed production at 1.45 million tonnes for 2016-17, as against 1.73 mt the previous year. The Solvent Extractors' Association of India has estimated seed production to decline by 25 per cent, from 1.43 mt in 2015-16 to 1.06 mt in 2016-17. M G Dhandhalya, associate research scientist at JAU, said: “We need about 1.64 mt of seed to match the export and domestic demand.”

Farmers also understand that holding the crop will give them a better return, which has restricted the arrival of seed in the producing belt.