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Tuesday, 10 December 2013

Development after Monsoon: Focus on Castor Seed

Indian economy is vitally linked with the monsoon because of its water resources. A large part of the country gets more than 75 per cent of the annual rainfall during the four months, June to September. Indian agriculture has been consistently facing increased pressure on account of population growth (Annual 1.53 per cent) and its extensive reliability on monsoon rains. Lack of improved irrigation facilities (only 45.2 per cent of the total cultivated area) has resulted in excessive dependence on monsoon and slight variation in the amount and timing of monsoon has serious impact on the overall food grain production of the country.
Why castor seeds prices jumped around 6% in spot market during May 31 and June 25 2013.
The major reason behind the rise in the prices is the expected export demand from China and European nations. India is the largest exporter of castor seed oil and exports 80% of its total castor oil to China, which is the world’s largest importer of Castor oil followed by US, Japan, Thailand and other European countries. Exports from India have been increasing at the rate of 7% year on year in the last 3 years. In 2011-12, India’s exported 404,489 MT of Castor Oil compare to previous year 343254: 40% of it to China, 35% to Europe and 11% to USA. As per Recent Data, Export of Castor Oil reached 67,000 MT for the month of June 2012, against the export of 59,000 MT for the month of May 2012.
What is the present production and consumption situation of castor seeds in India?
Castor is cultivated in 30 different countries on commercial scale, of which India, China and Brazil is the major castor growing countries accounting for 90 per cent of the world’s production. Historically, Brazil, China and India have been the key producing countries meeting global requirement. India is the leader in global castor production and dominates in international castor oil trade. Gujarat is the chief producing state, having a share of 77-80% of domestic production, followed by Andhra Pradesh and Rajasthan. As per our estimates, the total production of castor seed is expected to reach 12.70 lakh tonnes, an increase of 10.47 per cent over last year.
How monsoon can impact investment in castor seeds? Where do you see castor seeds prices by the end of the year 2014?
A normal monsoon is likely to support the castor seed crop and the production is likely to be on the higher side. As per the SEA estimates on 20.06.2013 the total area under castor seed was 0.19 lakh hectares against 0.04 lakh hectares. This figure itself shows that this year’s crop is going to be on the record high.
Investment decision in castor is considered to e a judicious one if you stay invested for whole the cropping season. Currently the prices are hovering in the range of 3200 to 3500. For the short term, no major upsurge is expected from the current levels, though the downside movement is very limited. If one is willing to stay invested for next 6 to 9 months, a price range of 4500 to 5000 can be expected.
Technical Analysis & Recommendation
 The trend in castor Seed is bullish. As per the chart February month is expected to test the levels of 4779 & 5080 on the higher side. It is advisable to enter fresh buy could be initiated at Levels between 3900 - 4000 (CMP 4386) with major stop loss @ 3480 levels.

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