MUMBAI, 19 May 2025: Wars in past and most recently has taught us to expect the unexpected. This column looks to highlight the geopolitical aspects of the India-Pakistan war and its impact on castor seed trade.
Recently, there was a week-long tension with Pakistan, but it has had an adverse effect on India's commodity business. In particular, castor seed prices, which were in the range of INR 6,130 in the first week of May, increased to INR 6,414 on May 14.
In this boom seen under the impact of the war, there was also the decline in castor arrivals in the spot markets. Also, the reports of a decline in Indian castor seed production became catalyst for bull run. Due to this uncertain time, traders seem to have become active in NCDEX castor seed futures for hedging.
As the difference between the spot market and futures prices has increased, cash & Carry Investors have also become active. Currently there is a difference between the two-month futures prices and offers ROI of 10% to 12%. So, it is also a good investment opportunity for investors.
However, both the Agriculture Ministry and industry body SEA had predicted a decline in castor seed production this year. The estimate given by the Solvent Extractors Association (SEA) last month had projected a production of 15.60 lakh tonnes of castor seed. While the second revised estimate given by the government has projected a production of 15.88 lakh tonnes. This could be 20 percent less than the production of 19.59 lakh tonnes of castor seed last year.
According to the data of the Ministry of Commerce, India exported 6.23 lakh tonnes of castor oil in the year 2024-25 till February-25, while according to the data of SEA, this export is said to be 6.45 lakh tonnes till March-25. Similarly, according to the data of the Ministry of Commerce, India has exported 2.59 lakh tonnes of castor meal. While according to the data of SEA, it has exported 3.0 lakh tonnes of meal.
The figures of castor seed arrivals in the nationwide markets indicates bull run, this time the castor seed arrivals in the months of February, March and April have been recorded at 37000 tonnes, 54000 tonnes and 186000 tonnes respectively, which is less than the arrivals in these months last year. There was discussion in the industry circles that the average arrivals in May would be one lakh bags.
However, in the last one week, as farmers suddenly showed a spark of arrivals and came to sell their goods at increased prices, the arrivals reached 1.50 lakh bags. That is why prices decrease was also seen on the last day of the week. As the war crisis has eased recently, exporters are expecting the start of exports to China and the Gulf countries again.
The shipments that were stopped at Kandla port will also start as usual. It is reported that the goods currently being bought in Rajasthan markets are being carried by investors who are interested in cash & carry and by investors who invest on the difference in price between two month’s futures. That is why there is currently a stock of 8300 tonnes of castor seed in NCDEX approved warehouses. As long as investors continue to earn interest of 11% to 12%, there is little chance of this stock coming to the market.
However, castor seed is an agricultural commodity that does not deteriorate or spoil for three to four years. Therefore, if the current boom continues, stock of old castor seeds may start arriving in the markets. There have been such experiences in the past that when there was a boom in castor seed prices, old castor came into the market.
It is said that the boom and the price swings are responsible for the current increase in daily volumes in NCDEX futures to INR 50 to INR 80 crores. However, this is a wartime and the direction can change at any time, which everyone will have to be ready to accept.
By Kalpesh Sheth is an commodities expert with years of experience.
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