Castor seed prices rise on lower production forecast and short covering: Angel Broking

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

"Castor seed futures jumps higher on Wednesday as market participants have expected lower production in the current season while the demands are higher. As per the latest third advance estimates for the Gujarat state published in the Directorate of Agriculture website, the production of castor seed in 2016/17 is revised down to 12.55 lakh tonnes, which is lower by 1.65 lt or 11% estimated in Jan 2017 in its second estimates. In 2015/16, the production was estimated at 14.13 lakh tonnes.

The May castor seed contract on NCDEX Futures rose more than 1.50 percent today, the biggest one-day percentage gain for the contract since Apr. 4, to settle at Rs. 4,675 per quintal. However, the open interest decreases today by 1790 tonnes which show short covering in the market. Therefore, if the price is rising and the open interest is declining then the short sellers happens to covering their positions which is causing the price rally. This indicates money is leaving the marketplace and thus a bearish sign.

Earlier, the castor futures have been declining after touching two year high in the first week of April. The decline in prices has been attributed to slow demand from the bulk buyers and crushers at higher prices despite forecasts of weaker output, slower arrivals in physical market and expectation of good export demand.

However, India Meteorological Department (IMD) forecasts the South-West monsoon is expected to be normal this year but the chances of El Nino in the later part of the year will have impact on the yield of kharif crops later in the season."

Source : Equity Bulls

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