1. Overview of the Castor Oil Industry
by
Abhay V. Udeshi
Chairman, SEA Castor Seed & Oil Council, SEA
at the 16th
Global Castor Conference on February 24, 2018,
Ahmedabad, Gujarat
Dear Friends and Respected Dignitaries on the dias,
I heartily welcome this august gathering including prominent personalities
of the castor industry, both from India and overseas.
For over a decade, this event has provided the castor fraternity with the
right platform to exchange information and knowledge on this vital product
– castor oil.
The castor oil industry continues to grow at a good pace. The exports of
castor oil during 2017 is approximately 600,000 Mtons, which is a record
high. Today, the castor oil industry along with the farmers engages over 1
million people and earns export revenue of over USD 1 Billion. India
continues to be leading and supplies over 85% of global castor oil and 1st
and 2nd
generation castor oil derivatives.
As expected the castor futures has been functioning smoothly under the
vigilant supervision of Securities and Exchange Board of India (SEBI), a
body enacted by the Parliament with all the necessary power to monitor,
investigate, regulate and control the market to ensure a fair, transparent
and a robust market. They ensured that the market remained orderly by
quickly imposing a cash margin of 20% on castor seeds futures, ensuring
it was not hijacked by speculators. Trading continued to reflect the
underlying fundamentals. While I believe that SEBI’s approach in
continuing the margin, long after cooling off, was over cautious. However,
it resulted in sending the right signals to the market i.e. a step in promoting
the confidence of a well-regulated castor seeds futures market.
2. Improvement in the mechanism for efficient deliveries, together with
quality and testing of goods, and the settlement of claims will still require
considerable work by the exchange to be a reliable platform for price
discovery, hedging, speculation, trading and delivery. NCDEX is also
considering introducing options in various commodities after testing them
in guar with SEBI’s approval. Thus, we can say the evolution of the futures
market will continue for some time to come. We can only expect that the
lessons learnt in the past will not be forgotten and the trade will welcome
a healthy, well-developed futures market.
As always, with castor, you can expect the unexpected. With last year’s
crop numbers, the industry and consumers were expecting a shortage in
availability towards the end of the season. The consumers of both, castor
seeds and oil were prepared for it. However, a greater than expected carry
forward of old stocks boosted the supply position and made castor seeds
available throughout the year, despite the continuing growth in exports.
Nevertheless, the major source of supply was from the carry forward
stocks during the fag end of the season as was evident with the poor
quality of castor oil available on the market.
This year, we at SEA have changed our Market Research agency for
carrying out the castor seeds crop survey. We have appointed Agriwatch
who will be presenting their crop estimates this afternoon with a fresh and
comprehensive approach – i.e cross-checking the government acreage
with the remote sensing utilizing satellite technology and for the yields
besides the normal farmer survey to use the crop cutting as an added tool
for verification. We hope that with this new approach we will have more
accurate crop estimation as this has always been a challenge. I would just
like to caution this audience that it is a difficult task for the estimation of
castor crop in view of multiple harvesting (pickings) which at times are
dependent on other factors – viz. price evolution and weather
development.
The response of the farmers to the tepid prices of castor seeds, prevailing
in July and August was evident with low sowing figures till the end of the
sowing season. However, due to heavy rains and floods in North Gujarat,
during the second half of July, there was a strong recovery in the castor
3. seeds sowing as many of the crops had been washed out and the sowing
period for most other crops had passed. Although there was a strong
recovery in the sowing acreage, as castor crop was the only alternative,
the Gujarat Government estimates of 595,000 hectares was below the
previous three years average by about 100,000 hectares. In the past few
years, the sowing area for castor seeds has been challenged by crops
such as pulses, guar gum, cotton and other oil seeds, in addition to fruits
and vegetables. This should raise a concern for the end users. In the best
interests of the industry, the larger users should continue to carry
insurance stocks which will protect the markets from any adverse effects.
Keeping the current scenario in mind, SEA’s initiative for improving farm
productivity is a step in the right direction. This is the second successful
year in which we have demonstrated higher yields by using quality inputs
and scientific farming techniques. I would like to acknowledge the efforts
of Mr. Haresh Vyas and Dr. B. V. Mehta, who with the support of major
castor industry players, continue to maximise the potential of the castor
plant. A similar initiative carried out by my own company, Jayant Agro-
Organics Ltd., has shown that farms cultivated by progressive farmers,
under experienced agronomists, have yielded up to 8000 Kgs per hectare,
which is 400% over the Gujarat state average of approximately 1700 Kgs
per hectare. These results should be particularly interesting to all the stake
holders, from farmers to end users, and beckon us to usher a new and
more promising era for the castor world.
The castor crop has a special significance for farmers, especially those of
Gujarat. Due to the sturdy nature of the crop and its long shelf-life, it has
been an insurance crop. It also allows the farmers to reduce the risk of
crop failure on one hand, with the option to time the sale of output on the
other. However, with improved availability of water and wider options, we
can no longer take this for granted. It is the duty of the industry to share
and spread the knowledge and practices that have been developed by our
agricultural universities. However, for my friends in the Government, it is
important to align agricultural research with the needs of the industry and
farmers. Short duration crop with high productivity with pest resistance is
what is required for sustaining the growth. The reward will be an abundant
crop at a reasonable price for years to come. I am confident that if the
industry sees a sufficient availability of crop at competitive prices vis-Ă -vis
4. the competing products like crude oil and other vegetable oils, the industry
will grow by leaps and bounds.
I would like to leave a thought for my farmer friends – focus on productivity
and not prices alone. A progressive and collaborative attitude, between
the farmers, institutions and corporates, dedicated to preserve the soil and
water will give all the stakeholders improved productivity. We must realise
that farming in India is at a cusp of change, where returns provided by the
farms will have to meet the expectations of the next generation. Due to
the vast opportunities available, the competition is no longer restricted to
crops and professional careers. We will need to match the other lucrative
options provided by a growing economy, to attract talented and
enterprising young farmers. The Government has been taking the right
steps to promoting Farmer Producer Organisations (FPOs) by providing
them with favourable tax treatment, thus allowing the aggregators to meet
the needs of inputs, farm services, processing and sale operations.
On behalf of the industry, I would first like to welcome the introduction of
GST which is good for all and economy in general. However with the lack
of necessary infrastructure and mechanism has resulted in massive
blockage of funds of the industry due to non-receipt of refunds against
exports. This is putting tremendous pressure on the industry. 85% of the
production of castor oil and its derivatives are exported. The process of
paying GST and claiming refund is not only cost accruing but also imposes
a tedious procedural task, with respect to the timing and resultant cost. To
do away with this uncertainty and promote the “Ease of doing Business”
we recommend that it would be much simpler to exempt castor seeds from
GST and only tax the products sold locally.
I would like to appreciate Dr. B. V. Mehta’s efforts since the inception of
this event. I have abundant faith in our proactive Government, agriculture
scientists, SEA, farmers and fellow industrialists.
I am sure today’s Conference, with its presentations and thought
provoking discussions, will enrich and benefit this gathering to make this
Castor world wiser.
5. I would like to end with a relevant quote from the management guru, Peter
Drucker, “The best way to predict the future is to create it.”
I believe that this opportunity will be grabbed with both hands, so my
friends welcome to a brighter and promising future of the castor world.
Thank you for your patient hearing
