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 MARKET: Markets are reported quieter during the second full week of May as some are suggesting prices may have reached their top. As a result, buyers have headed for the hills. Thinner markets are said to have helped some trades happen below last week’s level. Also some merchants have reported that a few trades have been done under last week’s price because of logistics or other negotiable factors. Overall the market sentiment is for prices to hold steady because of short supplies. Buying interest in the market is beginning to focus on trades for the June-July time frame. This fact may also be giving the nearby a slightly softer feel.  

The nearby business in the Southeast is showing the greatest amount of softness. Georgia’s traded ten dollars below last week’s offer level. Market participants are calling this a little price correction, as offers moved up quicker than the market was prepared to support. The lack of dairy demand had led some resellers to accept bids, which appear to be below the market value. The dairies reportedly buying are normally considered a group 1 user, but have slipped into group 2 because of such strong cottonseed prices. South Carolina nearby offers backed off four dollars, while North Carolina’s offer was off a dollar, and traded four dollars under the previous week’s offer. New crop offers in the Carolinas are a dollar lower, but bids are holding steady.

Mid-South prices are stable to stronger as resellers continue to come to market, albeit this week saw fewer interested buyers at stronger prices. Gins are reportedly quietly on the sidelines still waiting for the optimal time to sell. Truck availability has notably improved. Some have suggested that this and next week will provide some opportunities for booking freight before the Memorial Day weekend. Excessive rains in the region are generating more reseller buying interest in new crop, but the market is lacking sellers at current levels.

It is still a sellers’ market in Texas as transactions continue to take place closer to the offer side of the market. The loss of export buying interest has limited some of the vigor noted a couple weeks ago. Moisture concerns in West Texas is a common topic in conversations and for this reason, merchants are willing to wait and see if rain arrives to help develop the dry land crop. Nonetheless, drought conditions do not appear as dire this year as they were a year ago at this time.

Rail offers in California have reportedly slipped a couple dollars. This downward move is likely the result of some gin seed coming to market a couple dollars below last week’s high trades. The other rail markets are unchanged, but with markets as thin as they are, a couple extra rail cars on either side of the market can result in a price move up or down. Supplies to the Far West markets are said to be adequate, but some are suggesting stronger prices in Texas or the Mid-South, are causing some seed holders to redirect supplies earlier earmarked for the Far West rail market.

Supply tightness continues to keep prices strong and beyond the reach for most end users. It is interesting to note that last year at this time the Minneapolis Grain Exchange issued a press release explaining that the Cottonseed Contract would be de-listed, due to lack of interest. At this point it is impossible to know, but this crop year could have been a good opportunity for market players to have the option of a futures contract at their disposal to manage potential adverse price risk.

USDA REPORTS: The 2002 Cotton Ginnings Summary and the Crop Production report, released this week show a cottonseed crop of 6.183 million tons. Previous USDA reports had production reported at 6.419 million tons. This represents a reduction of 236,000 tons, or a decline of over three percent. Last year at this time, the production number was brought down also. While this news should be no great surprise for the industry, it does help explain some of the supply tightness noted in the market place.

The Cotton Ginnings Summary reports 921 gins were active during the 2002 season. This confirms the continuing trend of consolidation in the ginning industry as 49 fewer gins were reported in operation during the 2002 crop year. Last year’s report showed 48 fewer gins compared to the year earlier. The reductions are not concentrated to a single region, rather reductions were rather evenly distributed. Only New Mexico was the state with the same number of gins as reported a year ago.

COTTONSEED SUPPLY/DEMAND BALANCE SHEET UPDATE: USDA’s old crop balance sheet has some minor shifting which should be supportive to price. The crush level was increased by 50,000 tons and exports are up 20,000 tons. This results in a 70,000-ton increase in disappearance and brings down ending stocks to 400,000 tons. Next month, old crop cottonseed production will likely be reduced.

This issue marks the first balance sheet for new crop. The major difference for USDA between new and old crop is an increase in imported cottonseed. The feed, seed and other category as well as more cottonseed being crushed is expected to rise on the demand side, which will raise ending stocks by a mere 10,000 tons.

In general, the balance sheets by Sparks have a more bullish undertone and are more reflective of our current tight supply-driven market. The old crop balance sheet has a 240,000-ton drop in production, which is along the lines of the reduction reported by USDA. Exports are raised by 30,000 tons and the feed category was lowered 15,000 tons, which lowers the ending stocks by 250,000 tons. The crush is left unchanged for now, but the next couple months may provide some further downward movement.

The new crop balance sheet from Sparks is rather neutral. Production is based on recent acreage and average seed yields, but weather still may be a major factor in final results. Compared to the current year, a larger crush is expected. Exports are more apt to exceed last year’s level as the Australian cotton crop appears to be developing within expectations, but a stronger Australian dollar may limit the actual amount imported. The feed, seed and other category are higher as well, with the assumption that cottonseed prices will trade in a range closer to average prices levels in previous years.