MUMBAI (Commoditiescontrol) - Cotton seed cake prices dropped around 10 percent during the last 15 days. In the wake of this downfall, there are talks of further fall in prices with the onset of monsoon or lower availability of cotton seed.
The India Meteorological Department (IMD) had predicted that monsoon would arrive two days ahead of the schedule. If the onset of monsoon is timely, cotton seed cake would come further under pressure. But if it gets delayed or weaker, chances of prices falling further are less.
Earlier, the Cotton Advisory Board (CAB) estimated country’s cotton production for this year at 398 lakh bales (170 kg each). But then, it lowered its estimation to 390 lakh bales. On the other hand, traders assessed production at 375 lakh bales. Normally, farmers get 65-66 percent cotton seed from kapas, from which cotton oil cake is produced. As per traders, cotton production was 50 lakh bales higher last year compared to the current season. So, availability of cotton seed reduced this year. As a result, availability of cotton seed cake also has been affected. While, demand in this cotton complex in rising every year. According to the government’s estimate, cotton seed production will be around 120 lakh tonnes and cotton cake production will be at about 102 lakh tonnes. But as per traders’ estimate, cotton seed production will be at 116 lakh tonnes and cotton cake production will be at 98 lakh tonnes.
Cotton cake is useful as a feed for cattle as it provides required nutrition to animals as it is enriched with fat. It is important to mention that sowing of fodder declined during the last Rabi and Kharif seasons, hence strong demand in cotton cake from February to May. Cotton cake prices increased. If we analyse prices in futures markets, feed gained around 35 percent during the current year. Cotton cake was traded at Rs. 1,420/100kg at the end of last year. Whereas, it rose to Rs. 1,927/100kg as on 11th May, 2015. However, prices touched lower level or Rs. 1,755/100kg. Cotton cake June contract was traded at Rs. 1,755/100kg at National Commodity and Derivatives Exchange (NCDEX) on Thursday. August contract was traded at Rs. 1,884/100kg.
Mr. Moolchand Gill from Jai Bajrang Ginning and Pressing, Bodvad said that cotton seed prices increased 5-10 percent every year. Last year, cotton seed was sold at Rs. 2,300/100kg. This year, the prices may reach Rs. 2,400-2,500/100kg. Obviously, cotton cake will gain if cotton seed increases. He said that panic is expected if monsoon comes at time. But overall tone will be bullish. Demand in cotton seed is good from cotton cake producers. He said that milk prices have increased, in such a situation farmers will not be hesitate to feed their animal with cotton cake. Cotton cake is enriched with fat that boosts fat in milk. On the other hand, dairies are paying Rs. 20-26 per litre milk. Milk prices depend on the quantity of fat in milk. So, farmers use cotton cake on the basis of it’s price and returns. It is necessary to feed animals with cotton cake for higher fat of milk and better health.
According to the Union Ministry of Agriculture, cotton was sown in 6.12 lakh hectares till 22 May. Last year, cotton sowing had not started till 22 May. Normally, cotton seed availability increases in case of higher cotton acreage. Possibility of reduction in cotton acreage this year cannot be ruled out as farmers did not get attractive price for their produce during the current season. Few days ago, International Cotton Advisory committee (ICAC) had estimated that cotton sowing area may reduce by 5 percent at 116 lakh ha. Last year, the acreage was 126-127 lakh ha. If cotton acreage reduces, cotton seed and cotton cake prices will not decline for long time. However, it may come down temporarily.
Mr. Devchand Thakkar, President of All Gujarat Cotton Seed Crushers Association said that cotton cake prices are not expected to fall till the arrival of new cotton seed. Currently, cotton seed is available in the hands of strong stockists and total stocks is also 20-25 percent lower than the last year. Mr. Thakkar said that cotton cake was necessary for milk giving animal. Although, consumption reduces in summer season. Demand in cotton cake increases from July to November as animals give birth between this period. Cotton cake is sold at Rs. 1,100/50kg in fine packaging in Radhanpur of Gujarat. Prices may reach Rs. 1,250/50kg in the near future. Cotton seed is available at Rs. 1,140/60kg in Kadi which may rise to Rs. 1,300/60kg.
Warangal (Telangana) based wholesaler of cotton cake Mr. Gopal Darak said that there are confusions regarding arrival of monsoon. It is not yet clear as to when monsoon will be active and how it will progress. Cotton cake prices may not rise in the near future if monsoon comes on schedule. Demand in cotton cake will not be as good if fodder production is normal due to good monsoon. Farmers look for cheaper alternate as feed. But prices may move in a range bound manner during the next one month in case if cotton sowing declines. Currently, farmers did not switch over as cotton cake is cheaper than Choori of pulses. Cotton cake is quoted at Rs. 1,800/100kg. He said that if monsoon arrives on time, cash flow in villages will improve, which will be a healthy sign for the overall trade.
Cotton seed oilcake stock at NCDEX affiliated warehouses was at 43,822 tonnes as on 27 May.
(By Commoditiescontrol Bureau; +91-22-40155533)
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