Castor Developments in Asia

ICOA General Meeting

San Diego, 18th May 2006

A.K. Mitra – Hindustan Lever Ltd.

Asia in Castor

• Dominant producero India + China produces 450,000 T Oil out of 500,000 T global

total (90%)

• Largest consumero Consumes 250,000 T Oil equivalent to 50% of global total

• Meets world demand of Castor oil and derivativeso Exports 200,000 T, fully covering Europe + North America needs

India produces close to 400,000 T oil and exports 300,000 T as Oil + Derivatives

Asia in Castor

• Rapid economic growtho China and India growing at fast rate (8% to 10% GDP growth)o Manufacturing growth at even higher rateo Internal consumption for Castor products will match this growth

• Reviewing exports portfolioo Stress on value-added products

• Castor yields/productiono India has overall average yield >1000 Kg/ha, poised to growo Area under cultivation to compete with other crops based on expected

returnso Commodity exchanges rapidly developing and disseminating relevant

informationo China yields/areas stagnant to falling

India and Castor

• India “ideal” for Castoro Higher yield than elsewhere, still growing (capable R&D)

o Lower labour cost

o Favourable agro-climatic condition

o Adequate area available for Castor cultivation

• Developing fasto Emerging as manufacturing hub for a host of goods

o Abundance of entrepreneurial and technical capabilities

o Focusing on value addition and export of finished goods

• Impact on Castoro Internal consumption on the rise – stronger sustenance for inputs

o Added thrust on Derivatives export

o International oil demand to compete with domestic

Castor Seed Prodn. - Asia

In ‘000 MT 2006 2005

India 900 820

China 125 100

Others 10 10

1035 930

10% higher crop : adequate to meet world demand pursuant to 4.5% GDP growth

Oil balance 2005 - Asia

In ‘000 MT Consumption Availability Surplus/

(Deficit)

India 100 400 300

China 100 55 (45)

Others 55 5 (50)

Total 255 460 205

Adequate to meet demand from rest of the world

Deriv. balance 2005 - Asia

In ‘000 MT Consumption Availability Surplus/

(Deficit)

India 15 65 50

China 25 55 30

Others 40 30 (10)

Total 80 150 70

Adequate to meet demand from rest of the world

Prices have fallen monotonically from SQ ’04 to DQ ’05; five quarters in a row

• Total fall of > Rs 10,500/T equivalent to 26%

• Good crop in ’05 and ’06; discounted in prices

• Target plus scheme; had impacted prices by upto $35/T (~5%)

Fsg fob Kandla (Rs/T)

25000

30000

35000

40000

45000

50000

55000

MQ 03 JQ 03 SQ 03 DQ 03 MQ 04 JQ 04 SQ 04 DQ 04 MQ 05 JQ 05 SQ 05 DQ 05 MQ 06

Rs /

T

Max

Min

Avg

Recent developments

• Target plus scheme abolished

• Forecast of insufficient monsoon

• Firming up of priceso ~2% up in MQ ’06 after 5 qtr fallo June futures @ 2% prem. (eff. 4.5%)o Aug futures @ 10% prem. (eff. 3.3%)

Volatility

Range as % of Average

MQ JQ SQ DQ

2003 18 20 27 16

2004 13 16 23 17

2005 8 8 15 7

2006 9

• Qtrly fluctuation significantly down from 2005

• SQ phenomenon interesting; even this has come down significantly

• For a commodity, 8% to 15% levels is remarkably low

Volatility

Possible reasons for reduced volatility since 2005• SEA crop survey in 2005 and 2006• Wide dissemination of survey results• “information” & “transparency” eliminate major seeds of

“speculation”

Reduction in horizon/extent of buying forward

Can ICOA help promote these further?• Participation in crop survey• Fine tune demand forecast and disseminate widely

Summary

• Asia (India) well placed to serve Castor world; both quantity and price wise

• Expect growth in value-added castor derivatives export with focus on manufacturing

• After softening over 5 quarters, Castor prices firming up

• Supply side measures significantly reduce volatility; a positive trend, to be nurtured

• ICOA role in promoting information dissemination to further “choke” speculation

Global Oil & Derivative Balance 2006 : a draft working

Overall as Oil Derivatives

(in ‘000T) Avail. Cons. Bal. Avail. Cons. Bal.

India 400 100 300 65 12 53

China 55 100 (45) 55 25 30

Japan   30 (30) 17 27 (10)

Mid East   10 (10)   5 (5)

APAC excl Japan 5 15 (10) 15 10 5

Total Asia 460 255 205 152 79 73

Brazil + South Am 43 30 13 30 15 15

Europe   140 (140) 10 70 (60)

USA, North Am   70 (70) 10 35 (25)

Other non Asia 5 3 2   3 (3)

Total non Asia 48 243 (195) 50 123 (73)

           

Total 508 498 10 202 202 0

Thank You