COTTONSEED GINNING REPORT: The running bales ginned total was 12.526 million bales as of March 1st. Since the February report, 266,650 bales were ginned. Texas contributed nearly 200,000 bales to this increase. Given the late start to harvest and ginning, only now have most gins completed their season.The running bales ginned total is 2.555 million bales or 17% below the 3-year average. Fewer plantings and rain damage this year are reason for the lower production. Favorable growing conditions raised yields in Texas were reason for the total being roughly 600,000 more bales, or 12% above the 3-year average. Oklahoma was the only other state with a running bales total above the 3-year average. USDA’s Annual Ginning report will be release on May 10th. This will have the final total for the 2015/16 crop and report the number of gins that ran.
COTTONSEED MARKET: Prices continue to trend lower as trading remain slow as buying interest nearby and forward remains weak for other feed ingredients as well. Current market conditions are expected to continue for the balance of March. This should keep cottonseed prices steady to slightly softer as sellers are expected to continue accepting bids to keep supplies moving.
As of mid-March oil mill bidding stopped causing markets to soften on weak margins. The net-value of cottonseed for Mid-South crushers remains below the nearby trading levels. This should keep crusher buyers out of the market. Current cottonseed prices are holding at levels too high to entice new cottonseed oil demand. If cottonseed prices were $10-15/ton lower it would raise the possibility of oil mills coming back to the market and potentially increase their crush.
Far West rail supplies have increased and are a burden to prices. The lower prices have attracted only modest buying interest from end users. This suggests that prices will need to continue edging lower to attract enough demand. Dairy margins remain thin to slightly negative which continues to suppress buying for the nearby and forward. This market environment is expected to continue given abundant milk and dairy product supplies in the world market that are depressing milk prices.
West Texas prices held steady as of mid-March, but trading has been light. Reduced buying interest in the Mid-South pressured prices lower. These Mid-South price declines suggest West Texas prices may need to soften further to remain competitive. Cottonseed trade normally is light ahead of the Easter holiday and is expected this year.
Southeast markets were quiet with light interest while offered levels were holding steady. Gins are reluctant sellers thinking at prices may rebound. However, poor end user demand and seed quality are factors that suggest more downside price risk.
COTTONSEED BALANCE SHEET:Current imports are unchanged, as the first half of the crop year totals 17,000 tons. Favorable growing conditions in Australia suggest abundant cottonseed supplies which could potentially trade to the US late in the crop year, but Australian prices will need to move lower for supplies to be competitive in the US market.
The crush total was lowered 25,000 tons this month, as the Mid-South prices of whole cottonseed has held firm and above the net-value for Mid-South crusher values. Demand for cottonseed oil has not improved enough to increase the projected crush. If crushing rates continue to average roughly 30% below the 5-year average, the total crush may need to be adjusted lower in coming months.
Exports were lowered 15,000 tons this month. Total exports were 35,604 tons at the middle of the crop year. The strength of the US dollar combined with below average quality in the Southeast are expected to limit the amount of exports to be shipped during the last half of the crop year.
The Feed, Seed and Other category was increased 40,000 tons picking up the tonnage from the other categories. Ongoing price declines on cottonseed are expected to continue and result in the revival of dairy buying interest. Compared to export and oil mill markets, the feed market is the one to clear supply from the market.
Ending stocks are unchanged hovering around 400,000 tons. The resulting stocks-to-use ratio of 9.8% is still above the 5-year average of 8.9%. Even if this year’s production was below average levels, there is ample supply and more downward price pressure is expected to attract sufficient demand.
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