June 8, 2012

India's Gujarat faces 50% cotton seed sales drop

The cotton seed producers of Gujarat, India have suffered up to 50% slump in sales so far in this season affirming fears that farmers are turning away from the once-lucrative commodity that has now become less profitable.

Sales have been hit most in Gujarat and Maharashtra, the two top seed producing states. In north India, where the seed marketing season has just ended, companies witnessed 15% fall in cotton seed sales.

Prices have been falling continuously since one year. Raw cotton which was sold at INR1,500 (US$27.33) per 20 kg in February, 2011, is now quoting at INR800 (US$14.58). For farmers, growing what is called as white gold is no longer profitable. They now prefer other kharif crops like groundnut, guar and soy, an official from a seed company said.

For companies, it is a two-pronged battle. Apart from the waning farmer-interest, illegal seeds or seeds produced without official licence, that cost half that of the branded varieties are flooding the market.

In Gujarat, 38 lakh packets of branded seeds were sold last year. The number can fall below 30 lakh for the current sowing season, the official said. "The typical rush of farmers to buy quality seeds is now absent," he says.

Cotton prices have fallen sharply in the last fortnight in international market. Cotton future at CBOT made a two-year low of 70.4 cent per lb on Wednesday. Domestic prices too are at INR32,000 (US$583) per candy (356 kg), a one-year low level.

"Falling prices and labour issues are impacting sales everywhere in the country," says Rama Swami, chairman of Rassi Seeds, a company that sells most in the country. "Pre-monsoon sowing has been poor. Future sales will now depend on the monsoon," he added.

In Gujarat, free availability of illegal seeds is causing losses for branded producers. As against the market price of INR930 (US$16.94) per 450gm packet (ball guard-2 variety), illegal seeds are available at INR400 (US$7.29). Farmers need one packet for sowing over one acre. The state requires 65 lakh packets while the total requirement in the country is four crore packets.

"It seems that season expired before opened this year," said a Gujarat marketing official of Nezuvidu, a Hyderabad headquartered company. Nezuvidu sold 5-6 lakh packets in Gujarat market in last season. It has distributed around five lakh packets to the dealers for this season. Prospect of lower realisation has forced farmers to reduce input costs and go in for non-certified seeds.

Pravinbhai Patel of Patel Agroseeds, a Rajkot-based distributor said, "Farmers are not much enthusiastic about cotton as they were in past two seasons. Current price fall disappointed them and many are undecided about what to sow in next kharif". But Patel does not expect more than 10% fall in cotton acreage as he says, farmers do not have a better option. "If rain are timely farmers with irrigation facilities will opt for groundnut, but if the monsoon is delayed, farmers have only two options - cotton and castor seed," he added.