Source: www.graincentral.com

By Henry Wells, |

08 February 2018

FURTHER downward pressure on Australian cottonseed prices is expected as ginning of the Queensland and New South Wales crops gathers pace and forces more seed into an oversupplied market lacking in export demand. China bought more than one-third of Australia’s 2017 cottonseed production, but trade sources said they are yet to see evidence of any shipments to this key volume market for shipments which would normally start in April.

Melbourne-based Cottonseed Intel principal, Geoff Barker, said certainty was needed in relation to Bollgard III cottonseed certification for imports to China, to at least give the market some chance of coming to life. “There’s no question the market can do the work, but we’ve had this trade issue hanging over us for at least 12 months,” Mr Barker said. “If that issue gets sorted, it will give the market confidence to trade into China. At the moment, there is no confidence.”

The 2018 cotton crop is forecast by industry to produce around 1.1 million tonnes of cottonseed, and trade sources said only around half can be used domestically by Cargill’s crushing plant at Narrabri, and by the stockfeed market. Japan, South Korea and the US have been Australia’s other key export markets for cottonseed in recent years. “Today we don’t have a US market because the US is in surplus. “We have been in this position before.”

The US surplus of cottonseed is also competing with Australian product into export markets, as well as satisfying dairy demand on the US West Coast. Australia’s export capacity was up to the task in previous seasons of high cotton production; the average export volume over the four years to 2014 was around 600,000t a year. “The year before last, we were selling cottonseed into China at prices which started at about A$280/t ex gin and the market traded up to about $340/t ex gin. “Oil values at the time were around US37c/lb and today they are around 34c/lb.

Mr Barker said there was practically no end-of-season carryout in the gins in southern NSW, where cottonseed was still selling at $280 ex-gin for nearby delivery in small quantities to graziers and container exporters. Ginning dampener Traders have said that processing of cotton could be held up by the market impasse, as ginners are unable to process uncontracted modules.

“A lot of seed has to go through a logistics channel that is not equipped to handle a lot of unsold seed.” Traders said growers would need to accept the reduced prices on offer this season in order to ensure a backlog of modules at the gin yard was not created.

The maths behind ginning at current values is that four 227kg bales of cotton lint at $520 each will have yielded one tonne of cottonseed, and the cost of ginning to produce each bale is around $65. Gin for seed contracts have been a staple of cotton processing in recent years.

They involve growers relinquishing their seed to the ginner to cover the costs of ginning their cotton. These contracts are not believed to be attractive for 2018 ginning, as the low price of cottonseed does not recover the cost of processing. (Source: www.graincentral.com)