Castor seed surges on weaker output, higher exports prospects: Angel Broking

Views of Mr. Ritesh Kumar Sahu (Fundamental Analyst - Agri Commodities, Angel Broking):

Castor seed futures on National Commodities and Derivatives Exchange (NCDEX) surged to two years high on Wednesday, supported by forecasts of weaker output, slower arrivals in physical market and expectation of good export demand for castor seed derivative products (meal and oil) in coming months.

Most active castor seed futures for April delivery on the NCDEX rose 2.25 per cent to Rs. 4,740 a quintal at 16.00 hrs today, the biggest daily gain this week. It will be the fourth consecutive weekly gain if the price continues to trade higher this week too. Castor seed prices on NCDEX have jumped more than 23 per cent since it is re-launch in January 2017.

The traded volumes in castor seed clocked an average of 9,600 lots of 10 tonnes each this week which was 4000-5000 lots in the previous week. The market participation rose in this counter as speculators sees good opportunity in earning good profits as the prices may rise further on forecasts of weaker output coupled with encouraging meal and oil exports data during February compared to previous month.

According to Solvent Extractors' Association (SEA) of India, castor seed acreage for the country in 2016/17 season declined by about 24.2% to 8.40 lakh hectares compared to last year acreage of over 11.08 lakh hectares. Castor Crop Survey 2016-17 released by SEA, castor production in Gujarat is expected to be 8.61 lakh tonnes (lt) in 2016-17 as compared to 11.73 lt the previous year.

Outlook

The price of castor seed have been surging this year as supplies have been on lower side. Country is going to see second successive year of lower production mainly due lower acreage. Despite the steady exports demand for meal and oil during the first two months of 2017, the prices have been in the higher side.

According to the physical market traders, the lower supplies this season is also due to rising holding capacity of castor farmers in Gujarat and Rajasthan. They are holding on to their castor crop in anticipation of higher prices by disrupting seasonal supply scenario. Cotton farmers have got higher prices earlier in the season by holding on to their crops, despite good production estimates and sufficient supplies, due to demonetization.

Currently, the oil mills and stockist are procuring castor seed more aggressively this season on account of lower production forecast and lesser supplies in physical market compared to normal peak arrivals. Further, the export demand for castor oil and meal, historically increased during the months of March, April, May and June will keep the prices supported at higher levels. We expect the prices to stay higher and may cross Rs. 5,000 per quintal as the harvesting season coming to end soon.

Source : Equity Bulls

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