Under the contract, cotton of various origins will be priced at a premium or discount to US cotton.
In addition to US delivery points, this new world contract also allows delivery in Australia, Malaysia and Taiwan for cotton from the US, Australia, Brazil, India, Benin, Burkina Faso, Cameroon, Ivory Coast and Mali.
The big textile mills are in India, Pakistan, Indonesia, and Bangladesh. In the physical market, cotton traders are transacting in these same locations.
“We selected these delivery points and origins because these are the most common origins of cotton that are sent to the Far East for the production of clothing and yarn,” said Jackson.
ICE successfully pushed to change a 99-year-old law so that international graders could check that cotton meets USDA standards and to allow cotton to be delivered by multiple methods.
The first physical delivery month for the contract will be May 2016, Jackson said, to allow time for logistical operations to get set up at various delivery points. (SH)
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