Southeast

Mid-South

Southwest

Far West

Specially Processed Products ($/ton)

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: At mid-month, nearby markets are mixed with some weakness reported in the Southeast and in California, while the Mid-South is holding steady and Texas firmed a couple dollars. Lack of buyers is cited in the markets with softness, and supply tightness is most often mentioned in the stronger markets. With less trading each passing week, there is now rational for price movements to turn downward especially in light of continued weak milk prices. Thus far, the equalizer to lower prices is supply tightness and seed being held in strong hands.

For another consecutive week most markets have mentioned that more buying is getting done on the deferred contracts. This has the appearance of resellers in the market supporting prices in order to cover requirements. At this point, more are convinced that prices will hold and there is very little downside to prices. The only problem is that once the reseller buying interest falters, most merchants admit that current prices are over and above what most dairies would be willing to pay with milk prices at current low levels. Contacts are much more vocal about their woes with receivables from dairies. This potentially may cause less disappearance and could push prices lower. 

The Mid-South market is remaining stable with a good share of trading reported in Western Tennessee and Arkansas. Quotes are up a couple dollars compared to last month with more trading being reported at mid-month. Once again, the truck market for nearby and deferred contracts is most active. More trucks available to the trade may be helping facilitate some of the trades reported. Poor quality and tight supplies in the delta states has limited reported sales out of Mississippi and Louisiana. Early in the month, a nearby trade in Louisiana was reported at $140. Values are expected to remain stout due to the tight supplies, and buyers are cautious because of concerns over quality.

Texas is the only market still showing strength, as the nearby is trading a couple dollars higher. A month ago, the nearby price was at a level where the previous top was achieved last year in July/August. But, over the past thirty days buying interest continues to support values. There has been more interest in booking new crop supplies in the $117-$120 price range. At the same time, many in the market have mentioned that trading of late, was rather quiet and lethargic. If there is a genuine slowdown in the market, prices are expected to falter. Merchants are not able to sell the occasional extra truckload to dairy users in the area, due to end users cutting back on cottonseed inclusion rates.

In the Far West, the inclusion rate reductions are a legitimate concern on the minds of many merchants. From the Pacific Northwest to the Central Valley there is more talk of end users being behind schedule with takeout. News of some end users washing out contracts could lead to more nearby price reductions. Overall, the amount of open interest is minimal and most users are sufficiently covered, and for this reason resellers are hard pressed to find interested buyers for nearby supplies. Typically, the Far West markets have provided healthy demand and robust buying. Market sediment does not foresee a return to strong buying until milk prices recover which will likely require several more months and less demand in the interim. The nearby to deferred price spread has narrowed by five dollars and is half as wide. Many in the industry see the demand picture in a pessimistic light, yet forward clock bookings have taken place at levels even to the nearby.

Delivered markets have had little extra activity as nearby prices are prohibitive to additional bookings. The Northeast is said to be the weakest market and the early season price run-up in the Southeast has kept buyers out of the market. Resellers in the Midwest are apparently helping support Mid-South prices. Of the rail markets, the Pacific Northwest appears to have the strongest buying interest. Nearby price spreads from eastern points to California are half of what they were a year ago, which will limit any additional supplies from moving west. There is a general bias for prices to move lower, but supply tightness acts as inertia keeping prices in a similar price range. 

COTTONSEED SUPPLY/DEMAND BALANCE SHEET UPDATE: This month’s USDA balance sheet has only a minor shifting of supplies on the disappearance side. The feed, seed and other category was cut by 40,000 tons. This reduction is offset by an increase in exports by 30,000 tons and crush by a meager 10,000 tons. With total supply and ending stocks unchanged there is little change in fundamentals, yet USDA’s modifications sends the bearish message that feed demand is lost.

After last month’s 45,000-ton reduction of feed, seed and other category, again the balance sheet of Sparks has another reduction. This month 40,000 tons is shifted from feed, seed and other category to the export category. Traders have mentioned that Mexico is a more eager buyer and some of the supplies originally destined for California are being shipped south of the border. After a three-year trade deficit with cottonseed, this year the US will be a net exporter of cottonseed. This year’s exports are on track to surpass last year’s record-breaking exports, and expectations are for the trend to continue.

Stocks to usage ratio are just over 6%, which are similar to those reported for the 2000/01-crop year, and equal the five-year average. Last year the ratio was a percentage point lower and the later months of summer provided a strong price rally after depressed prices early on. Crush forecasts anticipate a higher percentage than last year, but still it is 5% below the five-year average ratio of crush to supply. Even with the strongest cottonseed oil premiums in recent years, the cottonseed oil market and the crushing industry is not strong enough to greatly increase the crush. The feed market continues to provide the greatest amount of disappearance for cottonseed.