Fall in castor seed output likely to push up prices

AHMEDABAD : With castor production in India — the world’s largest producer — expected to drop to 6-7 lakh tonnes in ’06 from 9 lakh tonnes last year, prices of castor seeds have firmed up and are likely to increase further in the coming months.

A drastic fall of 40-50% in Gujarat’s castor production, the largest producer in the country, due to lower acreage as well as yields has led to such a scenario. With China, the world’s second largest producer of castor, also likely to report a drop in production, castor seed prices will get further support.

“On a conservative basis, India’s castor seed production is expected to fall to around 7 lakh tonnes from over 9 lakh tonnes last year. In a worst case scenario, it could go down to as low as 6-6.5 lakh tonnes this year,” said N Srinivasmoorthy, commodity analyst at commodities research firm CommodityIndia.com.

Gujarat’s castor seed production is likely to be under 4 lakh tonne this year compared to 5.7 lakh tonnes a year ago. Castor seed future prices on the National Commodity & Derivatives Exchange (NCDEX) have risen from Rs 300 in June to Rs 367 per 20 kg lot size at present.

“While the price may remain sideways or face a small correction in the short term, in the long term that is by March ’06, it is possible that castor seed futures price will cross Rs 400 per 20 kg lot size,” said Biren Vakil, head of Paradigm Commodity Advisors.

Castor cultivation in Gujarat has been hit on two fronts. Due to lower prices and longer crop duration of six months, many farmers preferred cotton and other pulses, thus moving out of castor farming. Then, heavy and erratic rains hit the existing crop, which led to a much lower yield.

“Even as production is down, the demand from domestic castor consuming industries like paints, detergents, lubricants and pharmaceuticals is going to be strong. This will lead to firmer prices,” said Mr Srinivasmoorthy. While India accounts for about 60% of the world’s castor production, China is the second largest producer with an estimated 20% share.

With China’s production likely to drop from around 2.5 lakh tonnes in ’05 to about 1.5 lakh tonnes this year, it is going to export more from India. So, demand from China will act as a further trigger for pushing up castor seed prices in India.

Jayant Oil Mills and Jayant Agro Organics each have an estimated 30% share of the castor oil market in India. Adani Exports, Hindustan Lever and Tata Exports are some of the other big names in this sector.