Castor Seed Seasonal Report

Price Movement

  • Castor seed market was on bull run during the period from first week of Feb’17 to April’17 wherein the futures prices rallied to Rs. 4999 per quintal from Rs. 3910 per quintal
  • The rally in castor seed was driven by the improvement in seasonal export demand for its derivatives i.e., oil and meal and weaker production estimates, which was pegged at 10.55 lakh tons, down by 26% Y/Y
  • However, castor seed prices failed to sustain the gains during AMJ quarter due to sluggish overseas demand for Indian castor meal amid higher supplies of fresh produce across the physical markets
  • Moreover, expectation of considerable increase in area under castor seed cultivation owing to significant returns in the last season and expectation of favourable monsoon in the current session supported the castor futures prices to trade lower
  • After slipping to four-month low on 7th June’17, prices have seen decent recovery from the last week of June’17 due to subdued supplies of quality seed mainly in north Gujarat region
  • The castor seed prices resumed their downtrend from the last week of August’17 on expectation of better yield due to healthy crop development as well as better crop management amid favourable weather condition across growing region

Production Estimates

  • KCTL BAW is forecasting a total production of 10.80 lakh tons of castor seed during the crop year of 2017-18, which is up by 2% Y/Y
  • Gujarat continued to be the largest producer of castor seed with output expected to rise by 5% Y/Y
  • However, production is likely to decrease by 4% and 16% in Rajasthan and Andhra Pradesh & Telangana respectively due to lower cultivation area under crop as farmers were shifted to other remunerative crops such as cotton and turmeric
  • Overall area brought under castor seeds cultivation decreased by 2% Y/Y    
  • Despite shrink in acreage, yield is expected to increase by 4% Y/Y because of favourable weather conditions and good agronomic practices adopted by the farmers across growing region

Balance Sheet

  • Despite of lower production in 2016-17, carry over stocks for the marketing year 2017-18 were higher at 6.39 lakh tons on decreased exports of  Indian castor oil and castor meal
  • For 2017-18, India’s castor seed production is estimated at 10.80 lakh tons, up by 2% Y/Y and down 24% from 2015-16 on healthy crop development amid better weather condition (Dry to weak rainfall)
  • Total supply of castor seed during the current season is estimated at 17.19 lakh tons, which is gained by 5% Y/Y
  • Domestic as well as overseas demand is expected to increase during the current season despite higher prices of premium quality material on anticipation of improvement of application in major consuming industries  
  • Hence, ending stocks are likely to be lower compared to previous year due to higher demand numbers

Export Performance: Castor Oil

  • India is the largest exporter of castor oil and has a market share of about 85-90%. China and Brazil are the second and third largest producers of castor oil in the global market contributing around 5-7% of the world exports
  • During the FY2016-17, Indian castor oil exports declined by 11% Y/Y to 4.85 lakh tons due to subdued demand from the international market as it was traded at higher prices on expectation of weaker output
  • However, in the first six months of FY2017-18, total castor oil exported was around 2.70 lakh tons, up by 3% Y/Y on higher consumption demand from US, Netherland, Russia and Japan
  • Netherland, France and China were the top importers of Indian castor oil for the FY2017-18

Export Performance: Castor Meal

  • India being the top producer of castor meal enjoys a top position in castor meal trade in the international market
  • Despite lower FOB prices, total castor meal export from India has shrunk by 14% Y/Y in the FY2016-17 on subdued demand mainly from bio-fuel industry
  • During the first seven months of FY2017-18, India has exports of 3.10 lakh tons of castor meal, which up by 22% Y/Y
  • Japan, Taiwan and France were remain top importers of Indian castor meal for the FY2017-18


Export Performance

  • During the first half of FY2017-18, Indian castor oil exports increased to 2.70 lakh tons, which is higher by 3% Y/Y while value gained by 50% Y/Y
  • Strong demand from international market due to lack of supplies of raw material (castor seed) across major producing region resulted higher exports at better prices
  • Castor meal exports from India went up by 22% Y/Y to 3.10 lakh tons during April- Oct’17on revival international demand at lower levels (FOB prices)

Fundamental Outlook

  • Castor seed futures are likely to trade on positive note in the long term tracking following fundamental factors
  • During the current season, supply side is expected to be comfortable with a decent beginning stocks on the back of lower exports of castor oil as well as castor meal in FY2016-17
  • Moreover, production is likely to increase by 2% Y/Y to 10.80 lakh tons on expectation of better yield amid favourable weather condition in major growing states
  • On demand front, once harvesting pace picks up, aggressive purchasing activities from crushing units as well as stockiest is expected to pick up for creating inventories of quality seed, which may push up the prices
  • Since the castor seed prices were trading near to their six-months low levels, fresh bulk buying activities are likely to commence in the near future
  • Overseas demand is likely to rise by 23% to 4.82 lakh tons in FY2017-18 while castor oil exports form India is expected to increase by 5% Y/Y to 5.12 lakh tons on account of increasing application in pharmaceutical, soaps, paint, varnish, lubricants and plasticizers based products; hence, ending stock is like to decrease by 5% Y/Y to 6.07 lakh tons  
  • Weather condition during the harvesting season i.e., in the month of December and January should be supportive; however heavy rainfall may damage the standing crops
  • Considering all these factors, KCTL Business Analysis Wing is recommending to buy castor seed futures for the medium to long term


Technical Outlook

  • At present price trade fibonacci retracement support level of 61.8% rally from low of 3881 till high of 5190, which is placed around 4370 level
  • We are expecting price take support from current level and around 4180 level in upcoming sessions
  • A momentum stochastic oscillator travels in oversold zone at weekly chart which suggest now any correction is an opportunity for upcoming sessions
  • Price trade below short term moving averages on daily and weekly chart
  • In current contract, we recommend buying opportunity on every dip or suggested level

Note: Recommendation is in Dec contract while executing trade in next available contracts levels to be adjusted based in premium/discount price to the December contract



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Posted by Content Publisher Monday, November 27, 2017 1:49:00 AM Categories: Seasonal Report


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