Commodity Analysis

Dealing room check

Veeresh Hiremath | Updated on January 12, 2018 Published on January 15, 2017

Castor seed contracts surge

Castor Seed futures was the top performer on the National Commodity and Derivatives Exchange during the week ended January 13, 2017. NCDEX re-launched futures trading in the castor seed contract on January 5, 2017, after a suspension of nearly one year. Post re-launch the contract received an overwhelming response from traders and investors. During the week from January 9, 2017 to January 13, 2017, castor seed futures for February delivery rallied from a low of ₹3,970 per quintal to test a high of ₹4,237 per quintal, posting gains of 6.72 per cent. However, towards end of the week, the market pared some of the gains and ended the week at ₹4,195 per quintal. Lower supply situation due to smaller carryover stocks as well as fall in production led to a rally in the castor seed futures market.

According to preliminary estimates, castor seed supply for the year 2016-17 is expected to be around 13.5 lakh tonnes, which includes 4.5 lakh tonnes of carryover stocks and 9 lakh tonnes of production. In the year 2015-16, total castor seed production was 21 lakh tonnes. Due to higher production in 2015-16, castor seed prices fell sharply towards ₹3,000 per quintal, which led to farmers restricting the acreage under castor cultivation for the year 2016-17. According to the data released by Ministry of Agriculture, the total area under castor seed cultivation in the year 2016-17 was 8.35 lakh hectares against 10.97 lakh hectares planted a year ago. The normal demand for castor seed is around 14 lakh tonnes.

For the week ahead, castor seed futures are expected to show a positive trend. However, during early trading days of the week, the market is expected to correct on account of profit booking. Lower crop size and heavy demand for castor seeds are likely to keep the bullish momentum on during the week ahead.

The writer is Head – Commodity Research, Karvy Comtrade

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