India’s Cotton Oil Cake Market Review: Trade Outlook Remains Optimistic

Cotton markets have been trending upwards in line with the positive fundamentals. As export prospects remain better for Indian cotton and domestic demand continues improving post lock down phase, physical trades are showing consistent improvement in terms of volumes.

The main processed product of cotton i.e. cotton oil cake has also moved upwards as a result. Rising cotton prices and stable demand from the cattle feed industry continues supporting the oil cake markets currently.

Prices at Akola and Kadi have appreciated by Rs.20-25/qtl in last few weeks. As compared with cotton seed, the oil cake (cotton oil cake) prices have seen limited upside, since this commodity cannot be stored for a longer period, hence the stockists and traders generally prefer to sell without much price hikes, or even at discounts, whenever buying interest reduces.

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. 

The USDA’s last month’s release conveyed lowering of India’s Cotton production estimate by 500,000 bales after considering the rising instances of pest infestation. Pakistan’s production is estimated lower by 200,000 bales higher while Australia’s production may be 100,000 bales higher. World consumption is projected 1.5 million bales higher versus previous estimate with China’s forecast being 1.0 million bales higher, reflecting growing domestic textile demand and exports.

India is the second largest cotton seed cake producing country in the world, next to China. Higher percentage of protein in cotton seed oilcake makes it suitable for animal feed in India. The consumption of milk in India is on the rising trend and likely to maintain the trend in future, therefore the domestic cotton seed oil cake market is bound to grow year on year.   Cotton seed oil cake is also used as fertilizer, either alone or in mixtures with other ingredients. The Oil cake is rich in nitrogen, phosphorus, potash, and various other plant food elements. 

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.

As such, chances of a major fall in the prices of cotton seed oil cake are quite low as of now. For this month cotton oil cake prices at Akola and Kadi may show moderate price fluctuations of Rs.20-30/qtl on either side, but selling interest may remain poor, since the overall price view for next few weeks remains positive.