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Biren Vakil
Ahmedabad, June 27: The first monsoon showers have spured castor-growers and millers into action. While the farmers are rushing to procure hybrid seeds, the millers are keenly awaiting supplies that will improve crushing operations. At present more than 70 per cent castor mills are shut due to wide price disparity and supply crunch.
According to leading brokers, castor trade is passing through a bad period for the last few months. Seed prices shot up due to speculative buying, while oil prices did not match the pace, thanks to lower offtake by exporters. As a result, seeds command an artificial premium, while oil is sold at relatively cheaper rates. Speculative buying has generate artificial supply crunch. Owing to inadequate supply of seeds, a majority of crushers are forced to put down their shutters, or operate at low capacity to minimise loses.
At present castor seeds fetch Rs 345 per 20 kg, while oil is sold at around Rs 365. At such a low `basis', (difference between seed and oil price) mills cannotoperate profitably. For the break even, oil should command minimum premium of Rs 40 over seeds. In the absence of satisfactory returns, only handful of units manage to run their business. "Current situation is a result of unhealthy speculation of cash markets. Some private financiers have bought seeds in huge quantities to make a fast buck. As the prices firmed, farmers and small traders refrained from selling. At least 30 lakh bag or 40 per cent of total crops, is lying in private warehouses. Millers and brokers feel that only good rainfall could force hoarders to offload their inventories," said Prakash Mehta, director of Swastick Overseas.
"If the price disparity goes unabated, millers and exporters would be unable to run their business successfully. Trading conditions could not improve." he added. Liquidity squeeze is also a matter of concern. At the present juncture, monsoon is the only hope. Castorseed cultivation is expected to double in key areas thanks to highly remunerative prices. It will alsorevive sagging oil exports, which fell short of expectations due to limited overseas buying. If all goes well, the next season would provide a much needed respite to the trade, said a trader.
Plummeting business confidence is also a major problem. Following last years' default debacle and consequent payment crisis, some leading crushers have eliminated brokers' role and have started direct dealing with large exporters. Illegal broking trade known as, `super' has also halted after a recent default by a large super trader. Presently a majority of the brokers are seating idle. If the trend continues, it would be difficult to meet both ends, said a leading broker.
Meanwhile castor cultivation is likely to attract any substantial rise in the coming year, thanks to highly remunerative prices. Presently castorseed is fetching a premium of Rs 120 over it's traditional rival rapeseed. At least 80 per cent rape seed stock has yet to be sold. Last year, the state had produced eight lakh tonnes of castorseed.Meanwhile trading in castorseed futures gained momentum following a good start to the monsoon and resumption of new parallel futures at Bhabhar. The new August futures opened at Rs 339.71 per 20 kg. Volume in the parallel futures is rising. Bhabhar became a nerve center of the castor future trade, as more and more upcountry speculators are taking positions in Bhabhar.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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