COTTONSEED MARKET: Trading remains light which is common for this time of year when supplies are limited due to gins having cleared out warehouses ahead of harvest and new crop supply. Nearby offers are thin and there hasn’t been much buying interest nor trading nearby. Resellers and dairy buyers appear to have sufficient supplies booked for the nearby and are holding off on purchases until anticipated lower-priced new crop supplies become available.
In the Southeast, old crop supply has tightened throughout the week with each trade supported by a modest increase in nearby prices. Trading volumes remain light given this time of year and tight supply. New crop trading volume remains below average levels. Dairy demand remains sluggish as availability of other feed ingredients suggests that prices will need to be more competitive than in past years in order to get back the demand that was lost over the past year.
Mid-South nearby offers have been difficult to find given the tight supply situation. The Delta states should have new crop cottonseed on the market during the last couple weeks of September. Mid-South new crop trading remains light. Gins are not motivated to sell at current prices yet other feed ingredient prices are weaker so they may need to reconsider their stance. Oil mills are keeping to the sidelines while their net-product value of whole cottonseed for oil mills has drifted a couple dollars lower as of Mid-September. The standoff between buyers and sellers is expected to last until October when more gins are running hard and offers are abundant. Currently, the buyers appear to have the upper hand and once supplies start backing up there will likely be additional downward pressure on prices.
West Texas nearby offers have firmed up by mid-September. End users are only coming to market once they need product to meet their immediate needs. New crop offers and bids have drifted lower, but trading remains light. There have been growing concerns about too much rain and not enough heat units for the West Texas crop to finish off the season to its full potential. Nonetheless, the percentage of abandonment will be below its average level and there should be ample cottonseed supply once ginning gets under way.
The California truck market had prices edge higher during September as supply tightened due to rail logistics. Dairy buying interest remains soft, and it appears that cottonseed prices will need to be more competitive. Pima supply continues to have difficulty to find demand even at its wide price spread to upland cottonseed.
Given larger than a year ago corn, soybean, and cottonseed crops, buyers are anticipating lower prices this fall. Gins are unwilling to sell at current levels in anticipation that there might be an event to prop up prices. New crop cottonseed prices are well below year ago and 5-year average levels suggesting there could be a glut of supply on the market this ginning season which poses the possibility of lower prices. This year the dairy margin outlook is favorable, but the dairy buyers have many competitive options available to them which will limit the upside price potential for cottonseed prices.
COTTONSEED BALANCE SHEET: USDA lowered 2015/16 crop imports 1,000 tons. Meanwhile, exports were raised 6,000 tons. The Feed, Seed, and Other category was lowered 8,000 tons. The net effect of the changes was a 1,000-ton increase from last month. This brings ending stocks to its lowest level since the 2009/10 crop year.
USDA raised 2016/17 production 92,000 tons which was the largest change in this month’s balance sheet report. The Feed, Seed, and Other category was raised 75,000 tons. Ending stocks were raised 18,000 tons to a level 32,000 tons below the 5-year average. The stocks to use ratio was raised two-tenths of a percent, but remains 1.1% below the 5-year average.
The Cottonseed Digest 2015/16 balance sheet has imports lowered a percentage point. The crush was raised 5,000 tons. USDA didn’t report a crush for July in the most recent Oilseed Crushing report. The crush has been running 30% below its 5-year average, so that is how a number for July was derived to raise the crop year total. Exports were raised 6,000 tons. Mexico was the primary destination for cottonseed with over 66,000 tons shipped. A close second place finisher was Saudi Arabia with more than 54,000 tons. The Feed, Seed, and Other category was raised 45,000 tons. Ending stocks were lowered 56,000 tons. The resulting ending stocks were eight-tenths a percent below the 5-year average.
For the 2016/17 crop year production was raised 45,000 tons, which was the largest change this month. The increase is based on increased acreage and mostly favorable crop conditions and ratings. Crop conditions are not as good as of mid-September a year ago when 43% of the crop was classified as good and 9% was excellent. The mid-month crop was classified at 39% as good and 9% as excellent. Imports were lowered 10,000 tons as ample supply and likelihood for below year ago prices should make the US market less attractive for sellers. The crush was raised 40,000 tons as greater seed supply and lower gin-run pricing should favor crusher profitability in coming months. Exports were raised 5,000 tons as lower prices should increase exports compared to a year ago. The Feed, Seed, and Other category are unchanged this week. Current dairy buying interest remains light, but prices are expected to be attractive enough to result in the highest usage from this category since the 2006/07 crop year. Ending stocks were 66,000 tons lower. The stocks to use ratio remains 1.5% above the 5-year average, which suggests supply should remain comfortable.
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