Cottonseed Buyer Profiles

GROUP 1: Base demand group that will formulate cottonseed in at a 4-6 lb. inclusion rate regardless of price. GROUP 2: Formulates at a 2-3 lb. inclusion rate regardless of price, and would like to feed at the 4-6 lb. level. However, the last 2-4 lb. is price sensitive. GROUP 3: This is the major swing factor for cottonseed demand. They enter the market when the price is right or other factors prevail (i.e. short hay supplies), and will subsequently exit when other opportunities exist. GROUP 4: This group does not have access to, or the ability to incorporate whole cottonseed into their rations. However over time, dairymen in this group will migrate up into Groups 1, 2 or 3.

COTTONSEED MARKETS: Before the Fourth of July, some offers where quoted higher, but only light trading has been reported as of mid-month. Markets are remaining quiet after the long holiday weekend. The strength on the CBOT starting back in late June has failed to scare up any exceptional buying interest. This lack of nearby demand has most markets feeling a little on the heavy side, which is also affecting buyer’s interest in new crop supplies. The Southeast and Mid-South may provide direction for other markets, and might trade lower to clean up some long positions before the end of the month.

Recent beneficial rains in the Mid-South and Southeast are dissolving some of the hearsay about poor crop development voiced only a couple weeks ago. The improved crop conditions are likely an offsetting factor to the rally on the CBOT. Also recent excessive heat in some dairy regions might be hampering feed consumption and putting a drag on the movement of supplies.

Nearby offers and bids in the Southeast are at basically a couple dollars below last month’s trading range. Georgia and Alabama appear to have a nearby market with the most gusto, as some trading is being reported closer to the offer side. There is greater interest in trading new crop as summer progresses, but offers are unchanged compared to last month and no trading was accomplished. The amount of coverage on new crop is expected to be very light; therefore with a major crop catastrophe out standing, it is likely that offers and bids will go back and forth a couple dollars for the next two or three months.

The Mid-South markets have had few trades to report, as there are more sellers than buyers as of late. This condition is giving the market a heavier feel. Once gins feel more confident in new crop, the nearby and new crop offers will likely move lower. Missouri Bootheel July offers are down two dollars hoping to attract buying interest. New crop offers in Memphis are up four dollars and Missouri bids are up the same amount. Missouri’s cotton crop condition declined while neighboring states’ crop conditions improved.

In Texas, the nearby market continues the consistent firming trend started way back in May. Resellers are doing most of the buying, with some recent purchases done to cover the next month. Small quantities of new crop traded at the asking price. Improved crop conditions in the state will likely limit the potential for upward new crop price movement.

The California market is much more stable than last year. Prices are a mere couple dollars lower. The market is reportedly busy with the execution of current contracts, as only small nearby trades are taking place. California rail supplies are reported as adequate and values are steady. Forward offers are flat to the nearby. Delivered clock offers are steady, quoted in the low $180’s. 

For delivered markets, the Idaho and Pacific Northwest markets are firmest. Near term tightness is being cited for the price increase. Prices are expected to hold steady for the next couple weeks. Offers for new crop in delivered markets are quoted a couple dollars higher.

COTTONSEED SUPPLY/DEMAND BALANCE SHEET UPDATE: July’s USDA Oil Crops Outlook has a variety of changes to old and new crop balance sheets. Generally speaking the report is more bullish for old crop and a bit bearish for new crop, which is common for this point in the year. The improved vegetable oil outlook has the outside chance of shifting the current market mindset to be more bullish, but with expected weaker feed demand markets have a more bearish undertone.

For old crop, imports were raised 40,000 tons, but still below last year’s imports by over 150,000 tons. Crush was raised by 20,000 tons, and if cottonseed oil premiums go higher more seed might be crushed this season. The 40,000-ton increase from imports was added to the “feed, seed and other” category. The net difference for old crop is a lower ending stock figure by 20,000 tons. The Sparks balance sheet for old crop had only a 40,000-ton increase in imports, which was evened out by an increase in the feed, seed and other category by the same amount.

New crop supplies are lower based on old crops lower ending stocks and production estimated lower, which lowers the total supply 115,000 tons. The largest single change this month was the 250,000-ton reduction in new crop demand. Ending stocks are pushed 135,000 tons higher to 435,000, which is still 90,000 tons below old crop’s figure. 

The new crop balance sheet for Sparks has more minor changes. On the supply side, imports are lowered 25,000 tons. Production is lowered 100,000 tons, but the total is still higher than USDA’s figure as the crop shows improvements in most regions. On the demand side of the balance sheet, exports are off 25,000 tons. The seed, seed and other category is down 150,000 tons based on expected weaker dairy demand, as milk production has been trending higher and milk prices are forecasted to be sub par. Total disappearance is down 175,000 tons, which relates to an increase of ending stocks of 40,000 tons. 

USDA ACREAGE REPORT: On June 28th, NASS released their June Acreage report, which pegs cotton acreage 355,000 acres below the Perspective Planting report released in March. The all cotton total at 14.4 million acres is only slightly below industry estimates. Greater acreage shifts away from cotton in Mississippi, California and Louisiana on the USDA report account for the difference with Sparks’s estimates, which were released prior to USDA’s report. The report will likely be seen as bullish for suppliers, while demand at this point appears less than ideal.