The stars are lined up for higher gin-run cottonseed prices — already over $300 for some end users and climbing, according to Cotton Incorporated's Tom Wedegaertner, Cary, N.C.
Shining particularly bright is the U.S. dairymen's preference for cottonseed, which they continue to feed despite higher prices. “They really like feeding it and they have bid the price up and up,” Wedegaertner said.
“Just in the middle of December, cottonseed in North Carolina was around $200 a ton at the gin. West Texas was about $200 a ton and California was bumping close to $300 a ton. Delivered to the dairy cows in Wisconsin, cottonseed is $280 to $290 a ton. In the Pacific Northwest, it's over $300 a ton. And it just keeps going up, as is the case with some other feeding ingredients.
“This year, not only do we have expensive soybeans and soybean meal and wheat and corn — all the feeding ingredients are high — we have a smaller cotton crop. So we're only going to have 6.5 million tons of cottonseed instead of something in excess of 8 million tons.”
According to Wedegaertner, it's no surprise dairymen are willing to pay what they do for cottonseed — it's an almost perfect ingredient for their cows. “It has fat, but it's not free fat, so it's not like you're dumping some fat into the diet. Cows don't like fat just dumped on their food. They like it inside of a seed. Cottonseed being 16 percent to 18 percent fat works really well in a high-producing dairy cow.
“Cottonseed oil in the seed goes directly into butterfat, so they'll usually see a boost in butterfat, which is what they get paid for. And generally, they'll see a boost in milk production from the cow that's consuming cottonseed. It has the oil, but it also has a good load of protein, 22 percent to 23 percent.
“Cottonseed is also covered with this fiber, which is important, too. In cottonseed's case, it's all wrapped up in a neat little package. It's just what they need.”
Dairymen have only recently begun to recognize the value of cottonseed, beginning after the 1991 cotton crop — the first time cottonseed production broke 7 million tons. With the large crop, cottonseed was in abundance and was cheap because there wasn't an adequate infrastructure — primarily storage at gins and feed mills — to handle it.
“The 1991 cotton crop was the first time we broke 7 million tons. Prices at that time averaged $45 to $50 a ton in the Southeast.”
Over the next decade or so, the average price of cottonseed throughout the Cotton Belt bounced around from $80 to $90 a ton, depending on how much was produced, and by the early 2000s, prices were averaging around $100 a ton.
The turn of the new millennium brought in new cotton breeding lines, the widespread acceptance of genetically-engineered crops and a run of record-breaking crops of 22 million to 23 million bales. Cottonseed production climbed to over 8 million tons.
“With that huge supply, even though cottonseed didn't get as cheap as it had in 1991, we were able to get a lot of new users in the dairy and feed trade. We ramped up our marketing efforts, the dairies used the cottonseed and they liked it. So even with that huge supply, we didn't see the price go down.”
Wedegaertner says cottonseed prices still have room for improvement. “I would not be surprised next summer, depending on the 2008 crop and how much is planted, to see prices bumping $400 a ton.
“If milk prices stay high, fats stay high, nothing can happen to change that. I'm pretty bullish. I don't know what is going to bring cotton acres back other than $1 a pound cotton. Right now, a lot of farmers are thinking corn, soybeans and wheat.
“The sweet thing is that cottonseed oil prices are also very high along with all other fats and oils, which helps the crush side of the equation. And milk is very high, at $20 a hundredweight. It gives these dairymen the incentive to feed their cows the cottonseed.”
In dairy feeding, cottonseed can be blended at 15 percent of the total food ration of about 50 pounds per head per day. That's a maximum of about 7.5 pounds of cottonseed per day. “Most dairymen feed about 4 pounds to 5 pounds. They usually don't get much of a response until they feed 2 pounds to 3 pounds.”
To compute tons of cottonseed production, divide the number of bales by three. For example, a 21 million-bale cotton crop will produce 7 million tons of cottonseed.
Almost two-thirds of the cottonseed goes directly to dairy cow feeding, as fuzzy, gin-run cottonseed with no further processing. The other 35 percent to 40 percent goes to an oil mill for cottonseed meal, oil, linters and hulls.
At one time, the United States imported 200,000 tons of cottonseed annually from Australia for dairy feeding in California. “But over the years, the Australian crop has dropped off and with the weak dollar, we really don't import much anymore.
“We do export cottonseed (about 400,000 tons annually), mainly to Mexico and the Pacific Rim countries, Japan and Korea. We have continued to export even at these high prices because of the weak dollar.”
The market for cottonseed could expand even more with Cotton Incorporated research to eliminate gossypol in cottonseed. Currently, the presence of gossypol limits feeding to only dairy cows. “It's fairly toxic to pigs, chickens, fish and people. Once the gossypol is gone, then it's wide open. We can use it to feed any type of livestock.”
Research is also under way at Cotton Incorporated to add value to gin trash by converting it to erosion control products. “It's a substantial increase in value because you're taking a waste material that presents a disposal problem and you add significant value to it.”
Cotton Incorporated is also looking at using woody material from the ginning process such as burs and stems as a substitute for ground up wood in products like particle board, backing for bathtubs and shower stalls and thermo-plastic decking board. The ground wood is worth over $100 a ton.