USDA'S PRODUCTION REPORT: The running bales ginned total as of December 1st was 12.606 million bales. This is an increase of 2.484 million bales since the last report showing results from November 15th. The changes from the previous report are now beginning to slowly edge lower as there is less ginning across the Cotton Belt. In the next few reports the results for Texas will continue to climb above the 3-year average and the figures for states in other regions will lag further behind the average. Based on USDA’s production estimates, roughly a third of the crop is yet to be ginned, and of that over 4 million more bales are to be ginned in Texas.

USDA’s all cotton production forecast was 18.986 million bales in its December Production report released on Tuesday. This total is 36,000 bales below Informa’s most recent estimate. These reports show bales per acre yields at record highs. Nonetheless, due to less acreage, total production is expected down by 12% compared to last year. USDA’s cottonseed production estimate was 6.581 million tons, while Informa’s is slightly higher at 6.588 million tons. The increase is based on higher yield expectations in West Texas and the eastern half of the Cotton Belt.

COTTONSEED MARKET: Seasonal price strength continues to be the main feature of the market as sellers test buyers’ willingness to pay higher prices. The demand side of the market has yet to pull away from the market, so offers have been ratcheted higher. Fewer gins are expected to be available during the final couple weeks of December. Gins are patient sellers and are willing to wait for the market to reward them with higher prices for holding on to remaining unsold inventory. This fact should help pressure prices even higher. In most markets the main participants, are resellers.

Nearby prices in the Carolinas have shot up over $30/ton since the last installment. Exporters are mentioned as the most active buyers and the reason behind prices moving higher. Some of the buying made has been through March. Scarcity of sellers is still an issue in the market. Demand from Northeast dairies has become softer this month as prices climbed. Traders anticipate dairies won’t be back in the market until after the holidays and the degree of their presence will be dependent upon price levels. If price continue to rise, demand will be lost.

The Mid-South and West Texas prices are moving higher. There has been repositioning between these two markets. Profits are taken in the Mid-South and supply is replaced in West Texas. The movement of seed in West Texas is meeting expectations, but there are mounting concerns that ginning pressure may lower prices early next year. Many market participants in West Texas anticipated a down turn around the Thanksgiving holiday, but that didn’t materialize. Now expectations have been shifted for a price break in January. Thus far gins have been resolute in their price ideas and this has helped keep the market firm.

California nearby offers are higher and trading thanks to end user hand-to-mouth buying tactics. Rail offers are limited, but availability of truck supplies is not a concern. Some dairies are loading up on supplies before the end of the year and paying up slightly to take ownership of the seed before year’s end. There hasn’t been much trading activity on forward positions as resellers don’t want to add to their position at such high price levels.

COTTONSEED BALANCE SHEET: he only change to USDA’s balance sheet was 42,000 tons added to production. The same amount was added to the Feed, Seed and Other category, therefore the ending stocks level remains unchanged. The stocks to use ratio at 6% is below the 5-year average by a half percentage point.

Informa’s production was raised 118,000 tons, surpassing USDA’s estimate. A successful harvest season and high boll counts are behind higher production ideas. Crush and exports are unchanged. Crush values are at record highs thanks to strength in oil markets and protein markets. Export data for the first two months of the year exceed last year’s pace by nearly 17%. The Feed, Seed and Other category was raised 100,000 tons, as end user demand is steady. Ending stocks were upped 18,000 tons, which remains below the 5-year average by 69,000 tons. Until demand shows signs of backing off, the market is anticipated to remain stout and supply will continue to be supportive to higher prices.