Home / Knowledge / News / Textiles / NY cotton futures leap over holiday period
NY cotton futures leap over holiday period
07
Jan '12
Plexus Cotton Limited reports that New York futures made a big move to the upside over the holidays, with March gaining 750 points since December 22 to close at 94.74 cents.

After closing at 85.12 cents on December 14, the market has rallied an impressive 962 points over the last 14 sessions. However, while this move looks quite constructive on the chart, the fact that open interest has been declining sharply on Tuesday and Wednesday should be seen as a warning sign. Typically a powerful uptrend is validated by strong volume and rising open interest, which signals that a trend has momentum.

Surprisingly, open interest increased by only 1'531 contracts since December 14, which is not what we would expect to see in a ten cents move. Even more disappointing is that March open interest decreased by 7'880 lots, with most of this drop happening over the last two sessions.

This indicates that it was primarily short covering and profit taking that fueled the last four cents of the advance. Once the shorts are done covering, the buying will have to come from some other source, otherwise upside momentum will stall.

A lot of the short covering seems to be tied to the selling of physical cotton. When basis-long positions get sold to mills, merchants buy back the futures short that was hedging the physical long position.

Over the last couple of weeks mills have been very active in covering their needs for nearby shipment, taking advantage of relatively attractive prices. The fact that the world's biggest consumer of cotton, China, has engineered an artificially high price plateau (over 135 cents/lb) has created some welcomed breathing room for mills around the world.

The Chinese Reserve has continued to aggressively procure cotton in the domestic market, with today's total now amounting to over 10.5 million statistical bales. If we include an estimated 4.5 million bales of purchases abroad, the Reserve may have already accumulated a total of 15.0 million bales.

According to the latest USDA numbers, China is expected to have an 11.5 million bales production deficit this season, but if we add the 10.5 million bales that the Reserve has extracted from the market so far, we get to a statistical shortfall of 22.0 million bales, assuming there is no change in ending stocks. However, the impact of this shortfall on international prices may not be felt until later in the season, if at all.

If we take a look at how much cotton is currently still available to Chinese mills, we have 11.6 million bales in beginning stocks and 23.0 million bales in new crop that hasn't been taken up by the Reserve.

In addition to that China has already imported around 5.0 million bales since August, some of which belongs to the Reserve. For the purpose of this calculation we assume that 4.0 million of these imports are available to mills.

When we add all these numbers up, we get to almost 39 million bales of free supply. From that we have to deduct mill use of about 3.75 million bales per month, which amounts to roughly 19 million bales since August.


Must ReadView All

Apparel/Garments | On 23rd Sep 2017

AAFA urges negotiators to preserve TPLs in NAFTA

The American Apparel & Footwear Association (AAFA), an alliance of...

Textiles | On 23rd Sep 2017

SIMA urges Centre to re-look duty drawback rates

he Southern India Mills’ Association (SIMA) has appealed to the...

Textiles | On 23rd Sep 2017

PKR 690.65-mn budget for Pakistan Cotton Committee

The Pakistan Central Cotton Committee (PCCC) recently approved a PKR...

Interviews View All

Janak Dhamanwala & Sunil Dhamanwala
Jansun

Moving towards sustainability is also a social change

Manuj Terapanthi
Texaura

Transparent supply chain and fair trade will boost sustainable market

Headhonchos
Indian textile value chain

'One nation, one tax' is a great concept

Suresh Patel
Sidwin Fabric

Sidwin Fabric is a manufacturer and exporter of polypropylene textiles and ...

Kevin Nelson
TissueGen

Kevin Nelson, Chief Scientific Officer, TissueGen discusses the growing...

Lynda Kelly
Suominen Corporation

Suominen Corporation is a manufacturer of nonwovens as roll goods for...

Sidharth Sinha
Sidharth Sinha

<b>Sidharth Sinha</b> has contributed to the successful rebirth and...

Rupa Sood and Sharan Apparao
Nayaab

Nayaab, an exhibition meant to celebrate Indian weaves, is in its second...

Jay Ramrakhiani
Occasions Elegance Wear

It is believed that by early 19th century, Varanasi weavers had moved away ...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

September 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

news category


Related Categories:

Planning to Take the Leap towards
Sustainability?

Do you see sustainability as a route to business growth?

Yes No

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes No

Active Poll

Do you see sustainability as a route to business growth?

Yes
74.5%
No
12.8%
Skip
12.8%

Total Votes: 47

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes No

Active Poll

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes
61.7%
No
25.5%
Skip
12.8%

Total Votes: 47

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes No

Active Poll

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes
87.2%
No
6.4%
Skip
6.4%

Total Votes: 47

Thanks for your valuable feedback. Claim your free latest sustainability e-book.

Active Poll

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes
70.2%
No
10.6%
Skip
19.1%

Total Votes: 47


E-News Insight
Subscribe Today and Get the
Latest News Update in Your Mail Box.
Advanced Search