Southeast

Mid-South

Southwest

Far West

Specially Processed Products ($/ton)

Northeast

Midwest

Southwest

Rail - fob track points

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: Seller’s price expectations have dominated markets for the past couple months now. This seller’s market condition appears to have a future as long as little is know about next year’s crop and buyers continue to support prices. The price trend thus far has outpaced the upward climb noted a year ago. Supply tightness is a main factor in this quicker price run up. On average, this year’s balance sheets are showing roughly 100,000 tons less cottonseed in the ending stocks category. The main question remains how much more will the market needs to raise prices in order to ration supplies.         

On a macro scale among other competing feed ingredients, it appears the current price upswing is well justified. To put this into perspective, cash soybean meal prices are over a hundred dollars higher compared to last year. With cash soybean prices nearing ten dollars a bushel, Midwestern dairy farmers should be better off selling their soybeans to the local elevator rather than roasting them for feed. The going price for roasted soybeans in Southern Minnesota is near $400/ton, which is a historically high value. Milk prices are strong and higher prices for main dairy commodities has some merchants thinking milk producers will receive adequate milk prices in order to afford these higher cottonseed prices.         

Many merchants are of the opinion that dairymen’s feed position has much better coverage with other feed ingredients for the balance of the year. Due to this year’s late crop development and the marketing year pushed back, there was no clear period of strong gin pressure and low prices when dairies could feel confident they were buying at the bottom of the market. This is the second consecutive year of price strength during the February-March timeframe, which is typically a period of lower prices and a good buying opportunity. It is interesting to note that the last time prices were this high at this time of the year was back in 1996. It appears this seller’s market will continue for the next few months.       

In the Southeast, gins are said to be holding back supplies and keeping the market on a short leash. This fact is making market prices difficult to call as few transactions have taken place over the past few weeks. Nearby price in the Carolinas are quoted higher, and now are at the same levels. The new crop offers quoted in the region are reportedly coming exclusively from resellers.         

The Memphis North market is the main focal point for buying activity. In recent years, the Missouri Bootheel market had received a couple-dollar premium. But, with less buying interest in the area, prices are quoted even to the Memphis North market. Most of the buying is reportedly for rail deliveries and some buyers are said to pay up if supplies are located closer to the buyer’s rail points. Supply opinions of market players vary as some think there are still untapped supplies to be bought, yet week in and week out small sales are being reported leaving less for those on the sidelines. New crop offers and bids moved up, which pushes the price above the average level for the time period with less buying interest.         

In Texas, nearby supplies traded higher, this is seen as follow through after remarks about improved demand. The trades taking place are reportedly being done with resellers to cover their position. Merchants are complaining that the market is too thinly traded. Recent rains across the state have merchant’s optimistic for a larger crop next season. Planting in the Rio Grande Valley is expected to be completed with good subsoil moisture and sufficient water supplies in area reservoirs for irrigation. Because of recent weakness in fiber prices, growers could shift acreage away from cotton in the Coastal Bend area.         

California has had improved buying activity from end users over the past couple weeks. Some of the selling has come from gins or resellers to feed mills and end users. The California market is getting close to breaking into historical highs for the month of March. During the next few months, this market could reach more historical highs providing feed ingredient prices remain strong.         

COTTONSEED BALANCE SHEET: The March USDA Oil Crop Outlook has several changes to the USDA balance sheet. On the supply side, imports were pared back 25,000 tons. This amount is offset on the demand side as exports were reduced by the same amount. The largest shift this month is the 100,000-ton reduction in cottonseed to be crushed. This 100,000 tons was transferred over the Feed, Seed and Other category. The net effect of the changes leaves ending stocks unchanged.         

The Sparks balance sheet similarly has offsetting changes to the import and export totals. Due to higher freight and the lack of seed supplies, chances are good there won’t be an extensive import program this year. At the same time, stronger domestic prices appear to have limited purchases from Mexico, our main trading partner, and other export destinations do not appear to be making up the difference.         

The crush has been scaled back again by 50,000 tons. The January crush of 265,258 tons as reported by the US Census Bureau is the largest monthly crush thus far this season, yet it falls short of market expectations. Including January’s data, only 1.265 million tons of cottonseed were crushed. At this point, it seems unlikely that the crushing industry will be able to pick up the pace and crush much more than what was crushed during the first half of the year. Oil merchants have mentioned that buyer interest is lacking due to strong prices, which may be the overriding factor in limiting the crush.         

The Feed, Seed and Other category is increased again by 75,000 tons. Stronger dairy economics are a leading reason for this increase in demand. Ending stocks are reduced by 25,000 tons. This creates one of the lowest stock to usage ratios seen in recent years. Lower ending stock were reported in the ‘99-’00 crop year. Overall, the balance sheet reflects the strong bullish sentiment in the market.