Analysts who follow the product said buyers are getting ample supplies from this season’s harvest these days, which has led to weakness in castor markets over the past 15-20 days. In addition, due to rising prices, demand from local steel mills has been weak, so further price correction is expected in the near term. But the medium-term price setup is still bullish, analysts said.
The supply-demand balance remains bullish for castor beans from a broader perspective. The estimated consumption for 2021-2022 is around 19-20 lakh tons (LT). For the same period, the expected production plus carryover stocks may be close to 20-21 LT, signifying a tight supply situation.
According to the Solvent Extractors Association (SEA) report, castor flour exports increased by 40% year-on-year to reach 32,000 tonnes in February 2022. Total exports for fiscal year 2021/22 fell by around 5.5% at 3.60LT.
India’s castor bean production is estimated at 17.95 lakh tonnes (lt) in the current 2021-22 season, compared to 17.89 lakh tonnes in 2020-21. Castor oil exports in the April-February marketing year remain at the same level as last year’s export volume at 6.10 lakh tonnes despite a 30% rise in export prices. export this season.
“Due to a neck and neck supply and demand situation, there is a strong possibility that castor bean will approach the Rs 8,000 mark in the next 3-4 months. If export sales resume, prices might even stay above Rs 7,500 for a longer period,” said Abhijeet Banerjee, Principal Analyst at Religare Enterprises.
“The peak supply period will continue for a few more weeks and until then prices could go down to Rs 6,800-6,850/cwt.”
The NCDEX futures contract is making new highs month after month. The weekly charts, on the other hand, suggest a loosening of the strong trend over the past few weeks, and the active month contract (May) had been limited during this period.
“Buyers are walking every dip as the big picture is bullish. The short-term outlook is moderately bearish, so we expect the uptrend to be capped at least for the next few weeks,” Banerjee said. Short-term decline cannot be ruled out, but as long as the first month contract closes above Rs 6,740, there will always be a possibility that prices will move towards a higher price range of Rs 7,500-7 700 in the medium term.”
He advised traders to buy NCDEX June Castor between Rs 6,970 and 7,020 with a first target at Rs 7,500 and a second target at Rs 7,680. He said to place the stop loss at Rs 6,736 If the second target is met, this will result in a potential upside of around 10% in the buy zone.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)