Analysts tracking the commodity said buyers are getting abundant supplies from this season’s harvest these days due to which we have seen weakness in castor markets over the past 15-20 days. Moreover, due to higher prices, demand from local mills has been low, so there are expectations of further price correction in near term. But the medium-term price setup is still bullish, said analysts.
The demand-supply balance sheet remains bullish for castor seed from a broader perspective. The estimated consumption for 2021-2022 is around 19-20 lakh tonnes (LT). For the same period the expected production plus the carry over inventory may be just near to 20-21 LT, meaning a tight supply situation.
As per the SEA (Solvent Extractors Association) report, castor meal exports have increased by 40 per cent year on year to 32,000 tonnes in Feb 2022. Total exports for FY 2021/22 have fallen by around 5.5 per cent to 3.60 LT.
India’s castor seed production is estimated at 17.95 lakh tonnes (lt) during the current 2021-22 season, against 17.89 lakh tonnes in 2020- 21. Castor oil exports during the Apr-Feb marketing year remains at par with the last year export volume at 6.10 lakh tonnes despite a 30 per cent increase in export prices this season.
“Because of a neck to neck demand supply situation, there is a strong possibility of castor seed to move towards the Rs 8,000 mark in the next 3-4 months. In case export sales pick up, then prices may even sustain above Rs 7,500 for a longer period,” said Abhijeet Banerjee, senior analyst at Religare Enterprises.
“The peak supply period will continue for a few more weeks and till then, prices may go as low as Rs 6,800-6,850/quintal.”
The futures contract on NCDEX is making new highs month on month. The weekly charts on the other hand suggest easing of the strong trend in the recent weeks, and the active month (May) contract had been range bound during this period.
“The buyers are stepping at every dip since the broader view is bullish. The near term outlook is moderately bearish therefore we expect the upward trend to be capped for next few weeks at least,” said Banerjee. “Short term decline cannot be ruled out, but as long as the front month contract closes above Rs 6,740, there will always be a possibility for prices to move towards a higher price band of Rs 7,500-7,700 in the medium term.”
He advised traders to buy NCDEX June Castor between Rs 6,970-7,020 with first target at Rs 7,500, and second target at Rs 7,680. He said one should place stop loss at Rs 6,736. If the second target is met, this will mean a potential upside of about 10 per cent from the buy zone.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times.)