USDA REPORTS: USDA's All Cotton running bales ginned total as of the beginning of February was 14.8 million bales. Given that this running bales ginned total is 76,000 bales above USDA's All Cotton forecasted total, the ginning season is nearly complete. It is normal for the running bales ginned total to be above the final production total.
Compared to the 3-year average, this year's total is 944,000 bales higher and is 6.8% ahead of the 3-year average for this time of year. Larger than average cotton acreage and output in the Southeast and California, are the main factors for the increase in production. Ex-pectations for less cotton acres next year in the Southeast and Mid-South suggest that produc-tion could be several percentage points lower. If Texas and the rest of the Cotton Belt have an average production year, then the total produc-tion could should exceed this year's output.
COTTONSEED MARKET: Prices edged higher by the middle of the month. Buyers aggres-sively bid higher for the nearby and through the summer. Sellers have withdraw from the market giv-ing it a firm tone. The recent buying behavior would suggest that there could be some short positions attempting to cover their requirements.
After prices traded lower at the beginning of the month, it is questionable if enough new end user demand was gained. Dairy demand in the Northeast and Upper Midwest hasn't had a significant rebound from levels earlier in the month. For this reason, it is questionable if the recent price gains will be sustained. If dairy economics continue to be weak and crops develop favorably, prices will likely drift lower.
Southeast markets saw prices climb thanks to active trading. Now that ginning is done gins have raised their offers. There are fewer sellers which should lend support to prices. However, dairy demand remains soft, and interest is not expected to improve anytime soon. Considering cotton acre-age is projected to be smaller, gins are inclined to hold back supply as they see the potential for pric-es to remain strong if supply concerns develop. New crop prices have climbed higher as well. Vol-umes of recent trading remain small.
Mid-South prices have climbed higher as there has been an increase in reseller buying interest. As of Mid-February, both gins and resellers were making sales. Recently gins have become content with the amount they had sold. This lack of selling interest may provide some support to the market for the next few weeks. However, at current price levels demand will likely be lost. What may undermine continued price strength is how much more seed in the region still needs to trade. The drop in prices in early February may not have lasted long enough for dairies to get on board with buying. If dairies switch to using a different ingredient, sellers will need to be even more price competitive in order to win back the end user demand.
Nearby West Texas traded higher as of the middle of the month. Purchases were done mostly by resellers as dairy demand remains weak. Forward offers have edged higher. The staying power of the rally has been questioned due to abundant unsold supply.
Far West rail prices have climbed higher following the strength in the Southeast. California nearby trades have had the most action with resellers the prominent buyer. Trading through the sum-mer has been done even to the nearby. Buyers are concerned that recent floods in Australia will limit imports and tighten supply later this summer.
COTTONSEED BALANCE SHEET: USDA's balance sheet had an 65,000-ton offsetting change. Exports were lowered because shipments have lagged well behind the 5-year average. It appears there will continue to be sufficient supply in Australia to satisfy demand from most Asian buy-ers. The Feed, Seed and Other category picked up the amount that was taken out of exports. For the time being, interest from the feed sector is uninspiring.
The Cottonseed Digest balance sheet had a variety of downward adjustments. On the supply side, production was lowered 36,000 tons due to lower than expected production. Nonetheless, the supply situation appears abundant due to weaker than anticipated end user demand. Imports were lowered 30,000 tons. If a steady pace of shipments is not realized in coming months, then the total will need to be adjusted even lower in coming months. The recent flooding in Australia could limit produc-tion and exports. Australia will be exporting cottonseed; it is just a matter of how much will be available.
The Feed, Seed and Other category was raised 9,000 tons. Dairy economics have room for improvement be-fore they consider an increase in usage. In the West where cottonseed usage is typically strong, more end users are in group 2 of the buyer profile, while they normally would have been in group 1. Dwindling net values for crushers suggest that they will not be aggressively running absent a rebound in demand for cottonseed oil or meal. These changes result in ending stocks lowered 55,000 tons. The stocks-to-use ratio at 10.2% are above the 5-year av-erage of 9.3%.
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