Castor market fundamentals are tightening with seed production falling and exports rising. India is the world’s largest producer and crusher of castorseed and also the largest exporter of castor oil, accounting for close to 90 per cent of world production and trade.
There are two sets of seed production data – one by the Agriculture Ministry and the other from crop survey sponsored by Solvent Extractors’ Association.
While there is no unanimity within the trade on castorseed production data, the trend is clear – seed production has continued to fall for the second consecutive year after rising to a record 2011-12.
Falling inventories
While seed production is falling, castor oil export has been rising steadily for the last four years. From 4 lakh tonnes (lt) in 2011-12, shipments increased to 4.3 lt in 2012-13 and further to 3.7 lt in the first nine months of fiscal 2013-14, with projected export for the whole year placed at 4.6 lt. Rising oil exports also imply that large inventory of seed that was built up in the last two years are being crushed to produce oil. So, inventories are falling.
At the recently-concluded Global Castor Conference 2014 in Ahmedabad, one message that stood out clearly was that the castor market fundamentals are tightening and thanks to improved global economic outlook, prices have the potential to increase sharply.
The emerging scenario will benefit castorseed growers who have been, in a sense, short-changed by speculative forces in physical and futures markets. Castorseed prices have hovered around ₹4,000-4,200 a quintal, far below the potential price that they can command given India’s dominant position in the world market.
According to Atul Chaturvedi, CEO, Adani Wilmar Ltd, India exported close to 5 lt of castor oil in 2013 and this year, prospects of a 5 per cent rise in shipments are high. China has emerged as a major buyer of Indian castor oil at 2.3 lt, followed by traditional destinations – Europe (1.3 lt) and US (45,000 tonnes), he pointed out.