COTTONSEED MARKET: Prices have been mixed during August as local supplies have influence price direction. West Texas market prices shifted lower during the last half of August while trading has been light.Favorable rains have alleviated drought concerns in West Texas and as of mid-August there are more possibilities for rain. The Coastal Bend and Northern Coast will have their harvest and ginning efforts delayed several days because of the rain. The arrival of new crop seed in the Coastal Bend has put pressure on spot prices in the area. New crop offers in West Texas have been pressured lower as well, but trading remains limited as gins see current prices as being undervalued. Resellers and dairies have only bought a fraction of their forward needs. They are waiting on ginning pressure to push prices lower before coming to market to cover more of their needs.
Southeast and Mid-South markets have only limited open offers. Given the lack of buying interest, tight supply is a moot point yet prices have managed to edge modestly higher. Dairies in the Upper Midwest have put on some light coverage through the end of the year, but more buying is expected in coming months. Northeast dairies have been less willing to cover their needs. This year’s larger crop has many buyers holding off on making purchases as there will likely be more downward price pressure once gins are running and new crop hits the market.
The vessel of Australian cottonseed arrived in California boosting the nearby supply situation as of mid-month. Price spreads to eastern markets are holding steady, but there hasn’t been much trading of rail supplies given weak dairy demand. Pima prices have likely have bottomed this week as the price spread to upland seed is $100/ton; the widest of the year and should narrow.
Mid-South cottonseed’s relative price to distillers dried grains and cash soybean meal have edged slightly higher during the first half of August compared to July. The relative price is in line with their 5-year average which suggests that cottonseed is reasonably priced and should be defending its place in feed rations. Distillers dried grains could have more downward price potential which would likely be a drag on whole cottonseed prices as well. Cottonseed’s relative prices are apt to drift lower in coming months in order to stay competitive in feed rations.
COTTONSEED BALANCE SHEET: USDA’s 2015/16 balance sheet had imports raised 17,000 tons after being at zero all of the crop year. Exports were raised 30,000 tons while the feed, seed and other category was lowered 11,000 tons. Total disappearance was raised 19,000, which results in ending stocks down 2,000 tons. This brings the stocks-to-use ratio to 9.5% which is 0.6% above the 5-year average.
USDA lowered 2016/17 cottonseed beginning stocks by 2,000 tons, and production by 75,000 tons. Imports were zero last month and are pegged at 15,000 tons. These changes result in total supply being lowered 62,000 tons. The feed seed and other category was increased 3,000 tons. The stocks-to-use ratio at 7.6% is the lowest level since the 2011/12 crop year.
The Cottonseed Digest 2015/16 balance sheet has the crush lowered 20,000 tons on lighter than expected runtimes in recent months. Exports were raised 14,000 tons on stronger than expected shipments to Mexico and Saudi Arabia in recent months. The feed, seed and other category was lowered 80,000 tons as dairy demand has been below expectations. These changes resulted in an 86,000-ton increase to ending stocks. This puts the stocks-to-use ratio over 11%. Ending stock would be the highest since the 2008/09 crop year.
For the 2016/17 crop year ending stocks were raised 86,000 tons. Production was raised 100,000 tons as recent rains and expectations for an increase in reported cotton acreage from USDA’s Farm Service Agency. If conditions become favorable in West Texas and abandonment is below average, the production number may need to be adjusted higher in coming months. Total supply was raise 186,000 tons. The crush is unchanged from last month. This year should have better than year ago crushing economics as whole seed prices are apt to be lower and soybean oil prices should be higher to lend support to cottonseed oil prices. Until crushers show stronger interest in booking seed, the crush will remain at 1.6 million tons, which is 460,000 tons below the 5-year average. Exports were raised a modest 15,000 tons as competitive pricing this fall holds the potential for greater exports. The feed, seed and other category was raised 30,000 tons as some improvement in dairy economics raises the possibility of increased cottonseed inclusion rates provided prices remain competitive. Ending stocks were raised 141,000 tons and is at the largest level in 6 years. This crop year’s larger supply of corn and other feed ingredients is reason for large ending stocks.
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