Domestic Cotton Seed Cake Market Currently Subdued: Business Prospects still Optimistic

Cotton seed cake markets have undergone a downward price revision last week. Prices have turned expensive therefore market was already expecting such price adjustments, especially under given circumstances of increasing lockdown restrictions. Prices at Akola and Kadi have depreciated by Rs.100-125/qtl over previous week. 

Oil cake cannot be stored for a longer period, hence the stockists and traders generally prefer to sell without much price negotiations, and even at discounts, whenever buying interest reduces. Weakness in cotton also put pressure over the cotton cake prices during later days of April. Cotton seed oil cake is largely used as cattle feed as it comprises nearly 25% of protein content, therefore a good source of nutrition for cattle. The wider usage in cattle feed is also because cotton seed oil cake consumption by cattle helps increasing viscosity to the milk (for human consumption).  

Accounting for over 30% of total product value of cotton seed, cottonseed oilcake is the second most valuable product, obtained from the cotton seed. Cotton cake is presently offered near Rs2650/qtl at Kadi and around Rs.2750/qtl in Akola. Traders are willing to stock again in case they receive discount of Rs.75-100/qtl from the prevailing offers as the broad based factors indicate possibility of getting better returns in near future. As export prospects remain better for Indian cotton and domestic demand may improve once the lock- down restrictions are eased, physical trades of cotton cake can improve as well. (Assuming stable cattle feed demand scenario).  

There are optimistic views hopes that demand for cotton products in near term shall be robust from the global economic rebound amid concerns over chances of a significant reduction in the ending inventory. This year the production of Indian cotton is expected near 360 lakh bales and as per trade sources, around 270-275 lakh bales have arrived in the country till now. The CAI has kept its consumption estimate for the current crop year at 330 lakh bale in the previous month. Last season's consumption was 250 million bales due to disruptions caused by the Covid-19 epidemic. This indicates that there can be a reduction in the carryover stocks year on year because of increase in the consumption outlook. 

Another key aspect to note is that consumption of cotton cake may shift towards mixing in the animal feed rations as soy meal is quite expensive. This additional improvement in demand outlook has increased the possibility of higher price levels in forthcoming months.