Southeast

Mid-South

Southwest

Far West

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COTTONSEED MARKET: After gradual gains in March, as of mid-April it appears that prices have stalled out. Recent lack of buying demand is keeping most markets quiet. Some of the slowdown has been associated with a slight tightening of available trucks, as noticed in the Mid-South and Southeast. With little new or different information on plantings acreage, there has been very little interest in trading new crop contracts East of the Rockies. Regarding price movement, the next couple weeks’ markets will likely be lethargic. Until we get more specifics regarding the Farm Bill and a better read on demand or supply, the market lacks a reason to change current price expectations, for now.

The Texas market softened over the first couple weeks of April, with stronger selling interest than demand. There are expectations for these prices to be at or near the bottom. The remaining available seed is thought to be in stronger hands. Considering the recently traded price compared to last year’s price, the market may have cleared out the nearby availability, and there appears to be a bias towards firmness. At this point, new crop in this market is a non-issue. 

Prices in the Far West are slightly weaker on light trading. Offers in Arizona remain too high to win any business in California, due in part to available rail supplies. California demand continues to be the main feature of the region. Steady pricing is expected for the balance of the month, and once we get into May there are better chances for some moderate volatility. 

In the Pacific Northwest prices softened at mid-month. The lower prices are the result of additional nearby supplies in the market needing to find a buyer. This recent trade may have lowered buyer’s price expectations; subsequently, summer bids were slightly lower, but are expected higher.

COTTON ACREAGE: The USDA’s Prospective Plantings report was issued on March 28, 2002. It is USDA’s first survey-based estimate of spring plantings for the 2002 season. The report showed all cotton area at 14.771 million acres, which is below Sparks’s forecast of 15 million acres. Only the states of Georgia, Missouri, and Kansas showed increases for cotton area over last year. The states with the greatest reduction of acreage compared to last year’s upland plantings include the following: (Texas - 300,000; Mississippi - 220,000; Louisiana - 210,000; Arkansas - 110,000; California - 50,000; and, Tennessee - 40,000)

The report did not provide any major surprises, so it should not be a major factor for prices. There was much consternation regarding the accuracy of the report due to the uncertainty about the Farm Bill. As of late, some sources suggest that the Farm Bill should be completed by the end of the month. One should recall that the same situation existed in 1996. The intentions report turned out to be very optimistic at that time because the actual planted area was to be a half million acres less than the planting intentions report of 15.2 million acres. That would lead one to believe that the planting intentions number is likely high given the history.

A wet winter and early spring in the Mid-South have suggested that acreage moved to corn might shift back into cotton if growers can’t get into fields. The weather becomes critical for cotton area now that we have an indication of the farmers’ bias. Most farmers have indicated that cotton still provides the best return for them. Much of the switch to other crops is based on relative cost of production, rather than expected return. The acres in the USDA report suggest a crop of 18.2 million bales, which is lower than Sparks’s earlier thoughts of 18.6 million bales. 

COTTONSEED SUPPLY/DEMAND BALANCE SHEET UPDATE: The April USDA Oil Crops Outlook report provided no fundamental changes for their cottonseed supply and disappearance balance sheet. Their balance sheets for cottonseed meal and cottonseed oil were unchanged as well. However, on the Sparks’s balance sheet we have lowered the crush figure by 50,000 tons, and add the amount to the feed, seed, and other category.

Considering the data from the most recent US Census crush report, it appears less than likely for the industry to muster a much larger crush. After seven months, the industry has crushed 1.64 million tons of cottonseed. In order for the industry to meet Sparks’s 2.75 million ton crush, on a monthly average 222,000 tons of cottonseed will need to go to crush over the next five months. Typically, the last half of the crushing season does not match the level of production reached in the first half.

The amount of seed going to crush is in decline nominally, and on a percentage basis. When using figures from USDA’s balance sheet, the crush amount as a percentage of total supply is 35.7%, while the Sparks balance sheet shows 33.9%. Over the past several years, the percentage of crush to overall supply has declined. Greater production and larger ending stocks are smaller factors affecting this relationship. The major factor continues to be soft vegetable oil markets, and increased cottonseed demand from the feed industry. Going back 3 and 4 years ago, the percentage of crush was 44% and 51% crush respectively.

Ending stocks to usage ratios are higher this year compared to the past several years. The USDA balance sheet suggests ending stocks to usage ratio of 7.7%, whereas Sparks’s numbers show a significantly higher ratio of 12%. This higher ending stocks ratio is expected until the high inventories in storage find owners which are end users. The last time ending stocks to usage ratios were over 8% was during the 1997/98 crop year when ending stocks totaled 563,000 tons.