Click here  for a seven minute video summary of this issue.

Cottonseed is an important joint product of upland cotton production, where roughly 700 pounds of seed on average are produced from each 480 pound bale of cotton lint.   The majority of cottonseed marketing takes place from September to December after the typical harvest period in Texas. The value of whole cottonseed has traditionally been applied to offset ginning costs and past swings in price occurred as a result of inadequate storage capacities.   Historical observations of Texas whole cottonseed price implies that most of the time the price will be within plus-or-minus $65 per ton around the average price.  This level of variation is significant enough to expose growers to occasional ginning cost increases.  It might also represent a significant risk to the financial position of gins, co-ops, livestock feeders, and other users. Conventional risk management practices for other storable agricultural commodities consist of longer term storage, forward contracting, and using futures markets as a means to combat unfavorable price movements. However, special considerations must be made for storing such products and no futures market currently exists for cottonseed.  This limits users and growers in their marketing planning and risk reduction strategies.

For this reason, Extension agricultural economists studied the feasibility of hedging whole cottonseed using soybean and soybean meal futures contracts traded on the Chicago Board of Trade (click here for a written summary of this research). You can also click here for another brief summary about this research.  Again, a video discussion of this topic can be found here .