India’s castor oil exports are estimated to have increased to a four-year high of 6.44 lakh tonnes last year with China buying 50 percent of it to build inventory.
According to the Solvent Extractors Association of India (SEA) Executive Director BV Mehta, exports last year were against shipments of 5.45 lakh tonnes in 2019, 5.97 lakh tonnes in 2018 and 6.28 lakh tonnes in 2017.
India is the world's largest producer of castor seed and castor oil. The country exports about 90 percent of the oil globally with China being the major buyer.
China made efforts to buy castor seed last year but the Indian crushing industry opposed it arguing it would be better to export value-added products than ship raw material.
It also petitioned the Commerce Ministry to prevent export of any castor seed.
According to SEA, castor seed production this season (July 2020-June 2021) is estimated at 15.10 lakh tonnes against a record 19.55 lakh tonnes the previous season.
This is now estimated to result in production of 9.58 lakh tonnes of castor oil as the seed yields 49 percent oil when crushed.
Castor seed production had almost doubled during 2019-20 from 10.82 lakh tonnes in 2018-19. This was mainly aided by an increase in the cultivation area from 7.7 lakh hectares to 9.92 lakh hectares.
The per hectare yield also increased to 1,977 kg from 1,488 kg.
The area under castor seed this year is projected to have dropped to 8.32 lakh hectares since prices dropped sharply in June last year.
Castor seed production had increased during 2018-19 mainly because prices increased 30 percent to Rs 54,750 a quintal. With the novel Coronavirus (COVID-19) pandemic bringing the economy across the globe to a halt, prices dropped to below Rs 40,000 a quintal.
Prices have improved since then mainly after castor oil exports increased to 71,900 tonnes in May.
Currently, castor seed is quoted at Rs 42,300 a tonne at the Gondal agricultural produce marketing committee yard in Gujarat’s Rajkot district.
On NCDEX, spot castor seed is quoted at Rs 44,910 a tonne, while March futures are ruling at Rs 43,820 and February Rs 43,380.
During the same time last year, prices at Gondal were Rs 37,550 a tonne. Prices hit a high of Rs 44,050 a tonne in November 2019, data from the Ministry of Agriculture and Farmers’ Welfare showed.
Mehta said that castor seed production and yield were affected this season due to seed shortage and delayed sowing. This affected the production to the extent of 10 percent. Yield has been estimated lower at 1,815 kg.
According to SEA data, castor oil is currently quoted at Rs 94,000 a tonne against Rs 84,800 during the same time a year ago. First grade castor oil for exports are quoted at Rs 95,500 a tonne free-on-board from Kandla compared with Rs 87,100 a year ago.
Despite lower production, the ending stocks of castor seed could be 3.5 lakh tonnes compared with 2.5 lakh tonnes the previous year.
According to Professor Jayashankar Telangana State Agricultural University, higher production last season and this season has resulted in the huge ending stocks. It expects the stocks to impact the sentiment in the market.
Mehta said that total castor oil production last year was estimated at a little over 10 lakh tonnes with exports making up 6.5 lakh tonnes and exports of derivatives another 1.5 lakh tonnes. Domestic consumption of the oil has been pegged at a meagre 50,000 tonnes.
While castor oil exports increased last year, castor meal shipments dropped to 3.16 lakh tonnes during April-December last year compared with 4.79 lakh tonnes the previous year. Meal exports showed a rising trend in December, though.
With China having built inventories at a lower cost, castor oil exports could drop about 7.5 percent to six lakh tonnes in 2021, Mehta said.
The Netherlands, France, the US and Japan are other buyers of castor oil from India, though all of them have purchased below one lakh tonnes only.
Castor oil is an important ingredient for the global specialty chemical industry as it is the only commercial source of hydroxylate fatty acid.
No other country other than India produces more than one lakh tonnes of castor seed with Mozambique being a distance second. Its output is about 85,000 tonnes.
(Subramani Ra Mancombu is a journalist based in Chennai, who writes on topics in commodities and agriculture)