Castor Oil Supply Seen Lower by Oil World on India Planting Drop

Supplies of castor oil, used as a laxative and a lubricant in race-car engines, may decline in the next season as a drop in prices discourages Indian farmers from planting castor beans, Oil World said.

Castor oil prices in Rotterdam have fallen to about $1,520 to $1,530 a metric ton, the lowest in four years and down from a February 2011 peak of $2,750 a ton, the Hamburg-based oilseed researcher wrote in a report today.

India grows more than three quarters of the world’s castor seed, and the country’s record crop in 2011-12 has pushed down prices in the past two years, according to Oil World. Castor seed prices in India have fallen below those of peanuts, sesame seed and other oilseeds, according to the report.

“There is a high probability that India farmers will cut castor bean plantings this year in favor of other more lucrative crops,” Oil World wrote. “It is likely that some acreage will be lost in favor of better-priced groundnuts, millet and other crops.”

The forecast is based on a normal monsoon as a late or weak monsoon may benefit castor beans, which can be planted later than other crops, according to Oil World.

World castor seed production in 2012-13 is estimated to drop to 1.4 million tons from 2.03 million tons, led by production in India plunging to 1.1 million tons from 1.58 million tons, according to the report. Large beginning stocks in India of as much as 450,000 tons mean supplies were sufficient this season, Oil World said.

Castor oil consumption is predicted to climb to 674,000 tons in 2012-13 from 653,000 tons in 2011-12, while production is forecast to decline to 681,000 tons from 698,000 tons.

“We consider it possible that castor oil prices are near their bottom,” Oil World wrote. “A price recovery is likely for the remainder of this year.”

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