Hybrid cotton seed companies such as Rasi Seeds and Kaveri Seeds are facing a double whammy this year. Not only has the offtake of their Bt cotton hybrid seeds been impacted by the decline in acreage, the increased adoption of illegal or unapproved herbicide tolerant (HTBt) seeds by the farmers has also hit their sales.

Seed industry upset

Rasi reported a 20 per cent decline in sales of around 1.2 crore packets this season as against 1.5 crore packets, Ramaswami said. “This season was not much favourable to the industry as there was 15-20 per cent decline in Bt cottonseed sales,” said M Ramaswami, Chairman of Rasi Seeds Pvt Ltd, the largest player in the segment. Ramaswami said. The seed industry is upset and almost all companies are now saddled with huge carry forward stocks, he added.

Recently, Kaveri Seeds reported a 28 per cent decline in cottonseed volumes and revenues for the June quarter. Kaveri sold 49.7 lakh cottonseed packets in June quarter this year compared with 69.9 lakh packets in same period last year as the company saw dip in sales in States such as Andhra Pradesh, Telangana and Karnataka. However, Kaveri had gained market in Gujarat and Haryana.

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“Sales of hybrid seeds across the industry were significantly impacted in the quarter under review. While acreages of cotton were lower than the previous year, the decline in sales of branded seeds were much steeper. This was because a large part of the supply chain comprising our dealers and distributors were all constrained due to the pandemic and an erratic monsoon,” said G V Bhaskar Rao, Chairman and MD, Kaveri Seeds said in the June quarter earnings statement.

According to Agriculture Ministry, cotton acreage was down 7.4 per cent at 116.17 lakh ha as on August 12 compared to the same period last year when it was 125.47 lakh ha. “Though cotton prices are very good, there’s no interest among the farmers due to higher costs of cultivation and labour issues,” Ramasami said.

Illegal HTBt seeds

Besides, the use of illegal HTBt seeds has picked up this year, affecting the organised seed industry, sources said. Farmers, hit by pink bollworm menace, have taken to such illegal seeds, mainly in States such as Maharashtra, Gujarat, Telangana among others. “We are seeing a significant increase in use of illegal HTBt seeds which is impacting sales. We are engaged in a dialogue with the Government to address this situation,” Rao said.

The seed industry has estimated that sales of illegal HTBT cotton seeds has doubled to around 70 lakh packets this year. “The spread of illegal HTBt seeds is so prolific that an estimated 19-20 per cent of the cotton area has been covered under such unapproved seeds. We don’t know what shape it is going to take in the coming years,” Ramaswami said.

With huge carry forward stocks, the organised seed players are left with no option but to trim their production, which normally happens during April ahead of the start of the planting season in June. “Next year we will be able to correct the production. We may get a small relief if there is good sale,” Ramasami said.

As the companies procure the seeds from farmers under contract farming arrangement at a high price, they are forced to carry over the unsold stocks to the next cropping season. “Our cost of production is ₹400-450 per kg,” Ramasami said.

To maintain such carry-over stocks, the industry faces the risk of investment loss and has to bear the interest burden, Ramaswami said. Besides there’s an element of uncertainty as some varieties may go obsolete with the likelihood of shift in farmers’ preference in the next cropping season, Ramasami said.

The commercial cotton seed prices have also shot up this year on the back of bullish trend in edible oil prices. Cotton seed prices are now ruling higher at ₹4,500-5,000 per quintal, thus keeping the price of the fibre crop higher.