MUMBAI, 28 April 2025: Even if a pearl falls in the trash, it is still a pearl. If it is identified and sold, it gets its due price. In the current situation, cottonseed is proving to be like pearls for cotton ginners. Because the price of cottonseed oil cake is getting higher, they get some relief in ginning.
Those who have invested in cottonseed oil cake futures two months ago by understanding the market fundamentals are also earning good money at present. If we look at the graph of NCDEX futures, on March 04, 2025, the price of cottonseed oil cake per quintal was INR 2625. Which increased to INR 3010 on April 23, 2025, crossing the level of INR 3000. There are some reasons for such a bull run in the price of cake.
Since the start of this season, the government, i.e. Cotton Corporation of India (CCI), has started purchasing cotton at MSP-minimum support price. Due to this, the Kapas arrivals at ginning factories were very less. According to the ginners' estimates, CCI has purchased 100 lakh bales so far. Also, since CCI has been auctioning its cotton seeds time to time, there has been an ample supply of cotton seeds for crushing since the beginning of the season. But now there is a shortage of it.
On the other hand, this time the cotton crop is also less. Therefore, the production of cotton bales, cotton seeds and cotton seed oil cake is also going to decrease. Now there is a shortage of goods due to the low stock of cotton seeds available in the market. Due to the current heat wave and summer, there is a special demand for cotton seed oil cake for cattle consumption as a shortage of grass and fodder. Farmers are also stocking up, worried about not getting cattle feed in the coming days. All these factors are believed to be responsible for increasing the price of cottonseed oil cake.
The cottonseed oil cake market is still unorganised. There are no accurate and certified production figures, so everyone reverse calculates their own way and determines the production of cottonseed oil cake based on the production of cotton bales. That is why this time too, the Ministry of Agriculture has estimated the production of cottonseed meal at 78.48 lakh tonnes. Last year, it was 86.75 lakh tonnes. In addition, CAI has estimated the production at 77.69 lakh tonnes, which was 86.75 lakh tonnes last year.
Due to the reduction in cotton cultivation, India is expected to produce 296 lakh bales this year. Which will be 30 lakh bales less than last year. As a result, the production of cottonseed and cottonseed oil cake will also decrease. According to ginners, 180 lakh tonnes of cottonseed will be produced this year, of which 84 percent is made into cottonseed oil cake.
Currently, cotton bales, Kapas, cottonseed oil and cottonseed oil cake futures are available on futures platforms to reduce the price risk for ginners. Out of these, Kapas and cottonseed oil cake futures provide the highest volume, so ginners have to be satisfied by hedging their price risk in these futures. Currently, the average daily volume in cottonseed oil cake futures is INR 100 crore. While there is one lakh lots of open interest.
The agriculture sector is feeling a little relaxed due to the report of a good upcoming monsoon. But the cottonseed oil cake futures for the coming months still show high prices, so experts believe that there is no chance of a long-term downturn in cottonseed oil cake prices until next June.
Currently, investors should also keep an eye on calendar spread trading opportunities by investing in the futures prices of two different months. Well, the market is in favour of investors, but livestock owners and farmers will have to pay high prices to buy cottonseed oil cake for cattle feed.
By Kalpesh Sheth - an comodities expert with years of experience.
