Lower cotton prices have prompted cotton seed making companies to be ready for a dent in their sales this year.
Most of these fear seed demand would drop 12-15 per cent nationally, as more and more farmers have started switching from cotton to maize, groundnut and guar instead. They are pessimistic on a recovery in demand even after the Cabinet Committee on Economic Affairs (CCEA) revised the Minimum Support Price (MSP) for cotton today, by up to 28 per cent. For medium staple, the MSP has been raised from Rs 2,800 per quintal to Rs 3,600 per quintal and for long staple from Rs 3,300 to Rs 3,900 per quintal .
"The hike in MSP would not make any significant impact. Market prices are ruling almost at par with MSP. Many cotton growers are now shifting to guar, groundnut or soybean. Therefore, the demand for cotton seeds would remain under pressure," said Paresh Verma, former member of the governing council, National Seed Association of India.
Raw cotton prices were around Rs 7,500 per quintal in early 2011 and have fallen to Rs 3,800-4,000 per quintal in recent weeks.
Last year, seed companies had sold about 40 million packets (each 450g) of cotton seeds. Of this, five to seven million are sold by unorganised entities. Cotton seed prices are controlled by the government and these are Rs 900-Rs 930 per packet.
"By our estimate, there will be a drop of about 15 per cent in seed demand and the hike in MSP may only limit losses marginally," said Satish Kagliwal, managing director of Nath Seeds.
Lower demand would put pressure on the prices. Some of the majors in cotton seed supply are Mahyco, Rassi Seeds, Ankur and Monsanto. "We have placed the seeds at the distributor level. But there is no movement happening from there. Demand is weak in the current situation," said a senior official of Mahyco.
According to Uday Singh of Namdhari Seeds Pvt Ltd, a Bangalore-based seed maker, there has been a sharp surge in demand for maize instead of cotton. "More and more farmers in states like Maharashtra, Karnataka and Andhra Pradesh are opting for maize. There will be at least a five to seven per cent rise in the demand for maize seeds. Prices have been good in the past year and this year, too, they are likely to stay up," he said.
"This MSP (rise) is too low and it will not change farmers' decision to shift to other crops. Seed usage per acre has dropped but cost of seed has increased. There is no demand in some pockets of cotton growing regions,” said Ajay Vir Jakhar, chairman, Bharat Krishak Samaj (BKS), a farmers' body.
Meanwhile, with the monsoon progressing, sowing is expected to pick up. In Gujarat, the largest cotton growing state, government officials expect full-fledged sowing to start in a fortnight.