Upward Price Trend to Continue in Cotton Cake Markets

Cotton markets have been maintaining a firm trend these days. Similar trend is observed in its product i.e. cotton cake. The cotton seed is finally crushed for extraction of oil and the by-product, which remains after extraction of oil, is called Cotton Seed Oil Cake or Kapas Khali. Cotton seed oilcakes are semi-solid material which remains after extracting the oil from the cotton seed.

Basically, it is the residual product obtained after the oil is extracted from cotton seeds. Falling arrival numbers of raw cotton due to the lean supply season and thin stocks lying with ginners and farmers has resulted in supply crunch in the market. Prices of cotton cake in Kadi and Akola are offered between Rs 2925-3000/qtl and in last 3 weeks, the offers have appreciated by Rs.150/qtl roughly.  

The demand and supply balance sheet for cotton is indicative of prices to remain firm in coming months. The USDA in its latest report has pegged global ending stocks in 2021/22 down 1.7 million bales to 89.3 million versus 2020/21. Global consumption estimate for is also higher for 2021/22, up 1.1 million bales year on year. World trade on the other hand is estimated 1.1 million bales higher, considering better import possibilities from China, Bangladesh, and Turkey. 

Likewise Brazil, Australia, Tanzania, and the United States are expected to export greater quantity of cotton versus previous year. The industry remains optimistic demand for Indian cotton products to improve in near term from the global economic rebound. 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 level.   

The tight supply situation in cottonseed is expected to continue in the coming months considering the stronger demand outlook for the commodity. Also, the new season for cotton will start only in October – still a long time before the supply availability increases. There is another key factor which will be influential in favoring further price appreciation of cotton cake prices in forthcoming months - the 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.  

As long as the lockdown restrictions are not easing, trading activity shall remain disturbed which can restrict the upside, but over a period of time when situation starts improving, we can expect noticeable price appreciation in cotton cake. In coming days, fresh buying interest will emerge in case some price discounts are offered by the sellers. Currently cotton cake is offered between Rs 2925-3000/qtl in the major mandis of Akola and Kadi.