COTTONSEED MARKET: Lackluster end user buying continues to be the main feature of the market. The recent run up in corn and soybean complex futures has resulted in a few more inquiries. However, there hasn’t been much more trading accomplished compared to the first half of April. Most of the buyers remain focused on covering nearby needs. Dairy buying interest remains limited due to narrow profit margins. This poor economic situation is expected to linger for the next few months which should keep dairy demand light. Meanwhile, gins with unsold supply are reluctant to sell at current prices and are holding out for higher prices later in the season which is the historical norm. This year however, prices look to remain range bound with limited upside potential because there are ample supplies of other feed ingredients which are competitively priced.
The net value of cottonseed for crushers in the Mid-South continues to erode as does the pricing for cottonseed meal and hulls. With a net product value roughly $30/ton below cottonseed’s open offer, there isn’t an economic incentive for oil mills to come to market and increase their cottonseed holdings. This suggest that if cottonseed sellers want to attract more demand and keep inventories moving, prices will need to be lowered..
Southeast markets remain quiet as end user demand remains soft. Dairy interest in Florida has been more consistent than out of the Northeast. The dairies in the Northeast have more on-farm grown feed ingredients which are more economical than paying the going price for cottonseed. The narrow price spread between spot and new crop prices has kept gins on the sidelines as they anticipate there will be more upside potential for prices later in the summer. Given the lack of demand for cottonseed, any upside price potential appears it will be limited for the next few months.
The Mid-South market remains slow. This is likely the region with the tightest supplies and is reason for prices being stronger than Texas. In most years the Mid-South price is a discount to Texas due to the freight disadvantage going to Western rail markets. West Texas markets reported a modest increase in inquires following the strength in grain futures. For the time being, the inquiries hadn't resulted in an increase in volumes trading.
Far Western markets are holding steady to slightly firmer. The availability of supply has varied this week causing some offers to nudge higher as inventories have edged lower. Price spreads to California from other markets are narrower than normal and suggest less material will ship west during coming months.
COTTONSEED BALANCE SHEET: The USDA balance sheet was unchanged from last month. The Cottonseed Digest balance sheet has only a small change with the crush being lowered 5,000 tons while exports were raised 5,000 tons. The Feed, Seed and Other category was unchanged and represents a total that is 55% of the total supply of cottonseed. This is up a percentage point compared to last year. The demand from the feed sector remains lackluster but there continues to be modest near-by buying. This suggests more softening of prices is needed for prices will get to a level low enough to attract additional demand. Ending stocks are unchanged and hovering around 400,000 tons. This is below the 5-year average of 480,000 tons.
Cottonseed exports were raised 5,000 tons this month as February’s exports mark a high for the crop year. Shipments were stronger than expected to Mexico and Saudi Arabia. Exports early in the season were suppressed due to the strong dollar, late planting and slow crop development, rain/storm harvest delays and related quality issues. Unless cottonseed prices continue to soften, exports are expected to remain below year ago and 5-year average levels.
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