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: USDA’s August Crop Production Report provided higher than expected all cotton production at 17.1 million bales. Before the report, market expectations were between 16.3-17.3 million bales, with an average forecast of 16.7 million bales. The estimated harvested area from USDA is 12.3 million acres, which would represent about 10 percent abandonment nationwide. Abandonment in Texas is estimated at 20 percent, but the five-year average is just over 25 percent. With a lack of rain in West Texas over the past month, many contacts are voicing concern over bolls starting to drop off and yields edging lower as a result. Expectations are for the total production number to slip some in coming months. The graph below shows lower forecasted regional cottonseed production by Sparks Companies. 

As can be expected in Mid-August, old crop prices continue to move lower pressured by sufficient supplies available to the market and a lack of demand. Most say this quietness is expected considering the warm temperatures and general seasonal slowdown for nearby business. What is a greater concern to merchants across the country is the lack of forward bookings. End users are still reluctant to step up and take on some forward ownership, as they consider cottonseed prices are over valued. At the same time, most markets are reporting gins have raised their prices slightly on new crop, which is making matters only worse for sellers to get new crop supplies booked. 

Concerns over the late timing of new crop supplies may be a part of the reason for keeping prices high enough to discourage ownership and expectations for delivery early on in the ginning season. A later new crop arrival time will likely give old crop values the possibility to hold values longer than some have originally suspected. Some merchants are concerned that dairy buyers may try coming to market late-September to early October to pick up new crop at seasonally low prices, only to find old crop supplies at above average and current prices. 

Southeastern and Mid-South markets have some volatility in old crop markets as sellers are slow to show lower offers and buyers are nonchalant about bidding. As the old crop has firmed, the new crop as softened a couple dollars. The Georgia crop appears to have the best production in the Southeast, and current new crop offers may be the best buying opportunities. Mid-South old crop supply tightness is less of a concern, as buying interest has dropped off. There has been talk of July supplies being washed out, which is expected to pressure old crop prices lower. If ginning starts up late as some suspect, there is still the chance for an old crop rally before ginning is going full bore. 

Southwest and Far West markets are slowly moving lower. The Texas old crop market is steadily losing value as new crop supplies from the Coastal Bend are expected to add further downward pressure. Dry conditions in the western part of the state are cited for the increase in new crop offers. Contacts in West Texas have mentioned bolls are close to dropping, and yields will likely be scaled back. Mexican buying is not as active as some in the market expected. End user demand in California is below expected levels, but more volatility is anticipated in this market as forward books are reportedly light. Imports are a lingering and tough to answer question in the market, but it doesn’t appear as if much will be brought into the country as demand is reported as lackluster. 

Stronger milk prices are a welcome sign of improved dairy economics, however merchants have not yet felt the impact an improved cash flow situation at the end user level. Some merchants are saying they are one of many waiting for payment from dairies. Over the next couple months, the trickle down effect should help clear up merchants’ receivables. At the same time it should also help spur on more forward sales once dairymen are more confident about milk prices holding steady. This fact should help with cottonseed demand provided dairies aren’t already sufficiently booked with other competing feed ingredients. 

COTTONSEED SUPPLY/DEMAND BALANCE SHEET UPDATE: USDA’s old crop had a minor change to the disappearance side of the balance sheet. There was a 25,000-ton shift away from the feed, seed and other category to the export column. This change likely gives a more pessimistic outlook for new crop demand. USDA raised new crop supplies by 24,000 tons. This comes as a surprise as all cotton production for new crop is forecasted 105,000 bales less than last year, but the seed supply is raised to 100,000 tons more than last year. Imports were raised 75,000 tons, which increases new crop supplies by 99,000 tons. USDA ending stocks are kept at the traditional level noted for the past couple years of 400,000 tons. 

The Sparks Companies balance sheet for old crop has a 20,000-ton increase to exports, while the feed, seed and other category was lowered by 90,000 tons. Some of the additional supplies lingering in the nearby market were expected to be used by the dairy feed market, but due to lower inclusion rates, supplies are still on the market. Old crop ending stocks are raised 70,000 tons. 

Higher beginning stocks are the only increase for new crop’s supply side of the market. Due to lower cotton crop expectations, a 200,000-ton reduction is made to production. New crop total supply is reduced by 130,000 tons. Crush is unchanged and economics are expected to be much better for crushers than last year. With more sales to Mexico reported this week, exports were upped a modest 15,000 tons. With many merchants mentioning sub par bookings, the feed, seed and other category was lowered 100,000 tons. This represents the lowest level for the feed seed and other category in four years. At the same time ending stocks appear much lower than in recent years. The market appears to be tighter, but with weaker demand there may be less upside potential for prices later this year.