When you drive past a cotton field, you might think about soft-spun T-shirts, and a well-known advertising slogan may come to mind. After all, cotton is the “fabric of our lives.” But within each of those cotton bolls are whole cottonseeds that contribute to another significant market – and famous ad campaign. “Got milk?” 

Dairy cows consume more than half of U.S. cottonseed production. Whole fuzzy cottonseed is mixed into feed in bulk and is an exceptional source of protein, fat, and digestible fiber. Furthermore, cottonseed is shown to increase butterfat content in dairy milk production.  

Higher butterfat content translates to premiums for dairy farmers, especially when milk prices are up. It is a win for the herd and the producer. Amy May Hopper, commodity merchandizer at The Andersons, said, “We refer to cottonseed as a Snickers bar for dairy cattle. They like it and it tastes good to them.” 

The remainder of the cottonseed supply is processed and crushed for oil, and a small percentage (5 to 8%) is exported. So, what determines the price of cottonseed and what is the outlook for the value of this cotton byproduct? 

What drives cottonseed prices? 

The cottonseed market is complex, and the price outlook is influenced by two factors: cottonseed production based on the size of the cotton crop, and competing feed ingredient prices, such as soybeans. 

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John Robinson, professor and Extension specialist for cotton marketing at Texas A&M, considers himself a student of the cottonseed market. He said compared to last year, the USDA is projecting a bigger size cotton crop for 2024/25. So, year over year, we should have more supply of lint and cottonseed. 

Plus, soybean prices are lower at this point. Last year, soybeans were sold at $13.00 per bushel. Now, they are closer to $10.00 per bushel. Robinson said, “I feel confident saying the direction of cottonseed prices should be lower, year over year, because of those two combined influences.” 

As the crop is sold, monthly USDA projections of cottonseed are one measure of value. While these price trends are useful, ag economists say their level is not necessarily reflective of what a dairy is willing to pay for cottonseed.  

Price also fluctuates with other short-term influences like stress retention and logistics. In 2023, the U.S produced 3.68 million tons of cottonseed. Of that production, 2 million tons, or 54%, was marketed to dairy farmers. The remaining 37% of the cottonseed was crushed for oil, and a small percentage was exported. 

Related:5 tips for your cotton operation in uncertain times

Hopper said logistics play a key role in cottonseed marketing. She also emphasized the importance of understanding both the dairy feed and oil crush markets. 

“Regardless of your location, it is good to understand both markets, so you know what each are bidding. If you are in an area that does not have an oil mill, you probably need to partner with someone in the dairy market but keep aware of the oil mills’ influences in the market.   

“Vice versa, even if you are tributary to an oil mill, stay aware of what is happening with dairy interest, as they alone could be a strong bid to push up the whole market,” Hopper said. 

Who profits from cottonseed sales? 

In most cases, the gin takes possession of the cottonseed, and it is stored during the ginning process. Then, cottonseed is either contracted to a buyer or sold on the open market. Hopper said, “Gins are the frontline of profitability for cottonseed, but if cottonseed is at a really high price, a lot of gins will give rebates to their farmers.”  

From a broker perspective, Hopper explained that cottonseed trades to the dairy industry comparable to a grain as opposed to a feed ingredient. “Cottonseed is produced one time per year, then it is fed for 365 days out of the year. Managing the pipeline for the dairy farmers and for the gins who need it gone during harvest is a big part of the job and a big part why the market allows for merchants like us to exist.” 

In Port Lavaca, Texas, Holly Edwards works the gin and handles marketing at the Moreman Community Gin Association. Edwards said cottonseed pricing starts at the beginning of the season, and the market is competitive. 

Buyers range from dairy farmers to oil mills. “We contract a lot of the seed in the beginning. We also hold some cottonseed back, so we can get the best price in case the market goes up,” Edwards said. 

The gin calculates the collections that need to be withheld from each producer for ginning and insurance. Logistics and freight are part of the equation. Then cotton producers are credited for seed brought in, and in some cases the credit will cover their ginning charges. It all depends on the market. 

“Our goal is to get the best deal for our farmers, so we can give them a better rebate at the end of the season. They work hard all year round, so it is the least I can do to fight for their families to have a little extra in their pockets at the end of the season,” Edwards said. 

When cottonseed is sold to dairy farmers, quality is important. Edwards is certified to test for aflatoxin. She said, “If you are selling to a dairy, aflatoxin is a big part, and we test the cottonseed to protect the dairy herd.” 

What is the outlook for the cottonseed market? 

For the 2024/25 marketing year, Jon Devine, senior economist at Cotton Incorporated, said the largest projected change in cottonseed demand is expected to come from feed. He also explained how the demand for cottonseed oil is consistent, due to the fixed capacity of cottonseed mills.  

When sold for oil, the price of cottonseed is heavily influenced by the soybean market. Devine said, “Cottonseed represents just one piece of the oilseed market. Soybeans represent the largest piece of the oilseed world and are a primary driver of cottonseed prices.” 

So, what can we expect when marketing our cottonseed? Devine pointed out that soybean stocks are forecast to build during the 2024/25 crop year in most major soybean producing countries.  

“This suggests downward pressure on soybean prices, which suggests downward pressure on cottonseed prices. While soybean prices are influential, a way to support cottonseed demand is to keep cottonseed a preferred feed for dairy,” Devine said. 

Plus, most major row crops face difficult conditions as farmers look toward planting the 2025/26 crop. Crop prices have fallen to 2019 levels and input costs have risen 30% higher. The good news is macroeconomic policies around the world have started to take a favorable turn. 

Devine said the U.S., EU, and other markets have begun lowering interest rates. “While these rates are not expected to drop all the way down to stimulative levels, the fact they have reversed course suggests lighter headwinds for economic growth.”  

We also have China moving to stimulus, which could emerge a positive boost to demand from the Chinese market.  “Details have not been released yet, but expectations around the specifics may help markets,” Devine said.