India’s castor oil exports are likely to rise by 33% this year on rising demand from United States, China and European Union (EU), the three largest importers of the medicinal oil.

Exports of castor oil had taken a hit last year due to weak demand trend globally, dropping to around 429,000 tonne from 460,000 tonnes during 2012-13.

“Castor oil exports likely to hit 570,000 tonne at least due to robust demand from developed countries,” said Kanubhai Thakkar, Managing Director of Gokul Refoils & Solvent Ltd, the producer of “Gokul” brand edible oil and one of the largest exporters of castor oil in India.

Castor oil and its derivatives find uses in agriculture, cosmetics, electronics & telecommunications, food, lubricants, paints, inks and adhesives, paper, perfumeries, pharmaceuticals, plastics and rubber and textile chemicals.

Rising demand of castor oil, however, may pose a threat to castor seed availability in the Indian market due to shortage of output this year. India produces around 85% of global castor oil.

China has reportedly covered 85% of its annual need of over 180,000 tonne oil so far. Europe and United States too have covered an estimated 85% of its need of 120,000 and 60,000 tonne oil so far. While export demand from China, US and EU is unlikely to pick up as they wait for arrival of the new crop and rates to fall further, that from other countries is set to rise in the coming months.

Amid fears of supply shortage next year, demand from perennial buyers may also go up, said Thakkar, who estimates castor seed crop this year at 1 million tonne.

Meanwhile, a survey conducted by Religare Commodities shows India’s castor seed output will decline by 11% to 1.20 million tonne this year as compared to 1.35 million tonne during last year. Acreage was lower this year by 10% at 0.98 million ha as compared to 1.09 million ha last year.

“Total area under castor crop was estimated at 0.98 million ha, a decline of 10% from the previous year. Given that the unseasonal rainfall and hailstorms hit the standing crop, total output would not surpass 1 million tonne target. Thus, there will be an acute shortage of seed in lean season when demand rises post June,” said Thakkar.

Hyderabad–based independent firm Transgraph Consulting in a separate survey forecast India’s castor seed output at 1.04 million tonne due to low crop germination on extremely high temperature.

At an oil extraction rate between 46%, total seed requirement stands at around 1.5 million tonne. But assuming carrying over stocks at 400,000 tonne, demand will nullify surplus availability towards the current year end.

Castor prices have been under pressure for the last several months. According to Thakkar, farmers should fetch at least Rs 4,000-4,500 a quintal to remain in castor sowing. Any realisation below that is a loss for farmers which would have a cascading affect in future sowing, he added. Currently, castor seed is trading at Rs 3,400 a quintal in spot and futures market.

“The sustained growth of the industry is dependent on the delicate balance i.e. reasonable and remunerative price for the farmers on one hand, and affordable and stable price for the industry on the other," said Abhay Udeshi, chairman of SEA Castor Seed & Oil Council. He projected castor crop potential at 2.9 million tonne (equivalent to 1.3 million tonne of castor oil) by 2025.

Source:business-standard.com