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.

With this the sixth consecutive week of improved cotton crop condition rating, the offers for new crop have slowly moved lower in the Mid-South and Southeast. The overall rating of the crop is still just under the ten-year average. Typically by Mid-July the cotton crop condition begins to trend lower based on hot weather and lack of moisture. Last year, the crop improved through the first half of August, but a barrage of tropical storms undid progress. Therefore, history suggests this year’s crop condition will likely remain under the ten-year average. 

As of July 13th, the development of the crop is behind average in most regions except the Far West, where California and Arizona are setting bolls quicker than the five-year average. Oklahoma is the only state even with the five-year average, while remaining states are behind the average. This suggests that availability of seed to the market will be later than in previous years and could be an issue in providing volatility to nearby offers between now and Mid-October. Expectations in the country are for oil mills to be a bit more aggressive buyers this fall, which could help support “as ginned” prices. At this point however, there are no firm bids in the market from oil mills, mostly resellers are reporting little participation from gins. 

Southeast prices are above the price levels quoted at the end of last month, but are now edging lower. Last week old crop quotes are not falling as quickly as new crop. Compared to a month ago in the Carolinas, offers are up five dollars in South Carolina, but down two dollars in North Carolina. The “as ginned” offer and bid in the Carolinas is unchanged over the past several weeks. The good-looking cotton crop in Georgia is likely helping values edge lower with all positions down two to three dollars. The North Alabama nearby offer dropped nearly ten dollars, but the OND offer is slightly higher with very little trading taking place without the participation of gins. 

More sellers in the Mid-South are giving the market a sloppy feel. Some have suggested there are a few players with some length getting pressured to move supplies. Lack of end user demand is expected to keep downward pressure on sellers. There is not much dairy buying interest expected for the next couple months. Missouri Bootheel July offers are ten dollars below the last offer which represents the greatest drop in old crop values. Some are suggesting that with the slow development and later harvest there may still be time for seed to stage a rally in August or early September. 

In Texas concerns over Claudette may have helped raise the offers on new crop five dollars for the OND timeframe. Some delivered dairy clock offers would actually relate to a lower value. The southern valley, which was forecasted to get Claudette made it through the week unscathed. As a result, harvest and ginning in the region is expected to ramp up over the next couple weeks. Some acreage was reportedly blown down around Victoria, but loses in the costal bend are minimal in comparison to the roughly million-acre loss from the June thunderstorms. The old crop market is considered a non-issue as demand continues to decline. 

Demand in the Far West has some merchants alarmed. The old crop bid was raised and some trading was reported, but most merchants are critical about the lack of demand. The heat wave in the region is a factor limiting the amount of feed intake as well. Some are suggesting that a larger downturn in price will be necessary to attract more demand. Expectations are for end users to buy hand to mouth until new crop, and/or they become more comfortable with stronger milk prices going forward. 

COTTONSEED SUPPLY/DEMAND BALANCE SHEET UPDATE: This month’s USDA oil seed crop outlook has some changes to old and new crop. All of the changes for old crop were done on the disappearance side of the balance sheet. The crush was lowered 50,000 tons. This offsets the 20,000-increase to exports and 30,000-increase to the feed, seed and other category. These changes are a wash as ending stocks are unchanged, and likely represent the lost runtime at oil mills. As can be expected, the new crop balance sheet has larger shifts in tonnage between supply and disappearance. On the supply side, production is cut back 220,000 ton and imports were brought down 100,000 tons. Disappearance is increased by 320,000 tons, to keep ending stocks unchanged. 

The old crop balance sheet for Sparks is unchanged. It shows a tighter market than the USDA, with more disappearance in the feed, seed and other category. New crop production is lowered 200,000 tons because of slow crop development and unknown effects of storms in Texas. A caveat must be added that this still does have the potential to move higher. Imports are lowered 25,000 tons, as Australia’s crop estimates are down and exchange rates are not friendly. The feed, seed and other category has the largest change with a 275,000-ton reduction. The lackadaisical demand reported in the market and more competitive feed ingredients in the market this year suggest that cottonseed may be overlooked. For this section of demand to contribute more to disappearance, cottonseed prices need to be a bargain to end users. Ending stocks may be similar to USDA’s, but the market has a more bearish tone due to lighter feed demand.