Following the dramatic falls seen in Castor markets in the first month of this year, February saw the market downtrend slowing somewhat with prices falling by only $25/MT over the course of the month. As we enter March prices have again fallen as seed arrivals have picked up as we near the peak arrival season to sit at $895/MT FOB at present, just above 10-year lows.
At the annual Solvent Extractors Association (SEA) Castor Conference in Ahmedabad recently, the independent surveyor Nielsen announced an expected Indian crop size of 1,397,000 MT for 2016. This is 8% higher than their estimate released last year for 2015 and was broadly in line with most industry expectations which meant that price levels did not move a great deal immediately following their announcement. In a departure from previous years, Nielsen have used the government acreage this year rather than their own estimates meaning they have only estimated yield. Based on their crop number we are not expecting to see any supply issues in 2016 as combined with around 550,000 MT carry in should give total availability of nearing 2,000,000 MT of seed. The big news around the time of our last report was the suspension of Castor seed futures contracts following suspected price manipulation. This came as a significant shock to the market impacting on price discovery in the days that followed. Now that the dust has settled the Securities Exchange Board of India (SEBI) along with the NCDEX have started banning members they believed to be responsible. This initially saw four members banned with further companies also prevented from holding futures positions in recent days. Looking ahead, the main two factors which are likely to effect export prices in the next few weeks are bag arrivals into market yards and the Rupee. Seed arrivals have already started to increase as we near peak arrival season and are expected to continue to pick up apart from in the second half of this month when Indian financial year end closures and the Holi festival impact arrivals. The Rupee did at one stage look to be heading for the INR 70 per USD mark however in recent days has dipped below INR 67 per USD for the first time since mid January and this could have a supporting effect on export prices if this trend were to continue. With export prices hovering just above 10-year lows our advice to consumers is to take advantage of the current low prevailing Castor oil price and cover requirements for Q2 and beyond, especially as one now has to consider how much further prices can in reality fall.