Home / Knowledge / News / Textiles / European debt crisis may jeopardize cotton market
European debt crisis may jeopardize cotton market
19
May '12
Plexus Cotton Limited reported that New York (NY) futures continued to fall this week, as July dropped another 517 points to close at 76.65 cents, while December gave up 547 points to close at 73.90 cents.

Since closing at 92.62 cents on April 23, the market has dropped nearly 1600 points in a little over three weeks and it is still anybody's guess as to where this steep slide will finally come to a halt.

Looking at the long-term chart, the market has now come full circle and is back to about the same level from which it started its epic bull run two years ago. As you may remember, the December'10 contract began its historic rally from a base of around 74.00 cents in July 2010.

Unfortunately the statistical picture looks a lot worse today than it did in July 2010. Back then the USDA predicted a world crop of 116.0 million bales, which is not a lot different than the estimated 116.7 million bales for the coming season. World use on the other hand was expected at a much higher 119.7 million bales two years ago, while the forecast for next marketing year is at just 110 million bales.

However, the most dramatic difference between the two USDA snapshots is found in global ending stocks, which are projected to rise to 73.7 million bales in the coming season, or 23.8 million bales more than in July 2010. That's like having an additional US and Australian crop do deal with! Even inventories outside China are reflecting this bearish picture, as they are projected to amount to 14.4 million bales more than two years ago. Any which way we look at the current statistical picture, it's not a pretty one for the longs!

While mills were struggling during last year's bull market, it is now the growers who are finding themselves on the wrong side of the market. After many producers have seen their input cost go up to some 65-70 cents/lb in recent years, the current market price does not yield much profit anymore.

What a few weeks ago still amounted to a potential profit margin of 20-25 cents has since melted away to just 5-10 cents in many cases. Growers, who are far behind the curve in regards to forward contracting this season, were the most active group of sellers in New York over the last couple of weeks as they desperately tried to lock in these rapidly dwindling profit margins. Unfortunately there are still a lot of growers out there who are unprotected at this point, which is why we believe that the market will not be able to rebound much from current levels. Every time the market offers a spike in prices, it will likely be met by another wave of grower selling.

Outside markets are not offering any help to the cotton market either at the moment. Quite to the contrary! Since 2008, the four major central banks (Fed, ECB, Bank of Japan and Bank of England) have boosted their combined balance sheets from around 3.5 trillion dollars to 9.0 trillion dollars and injected unprecedented amounts of liquidity into the world's financial system via a variety of programs and schemes.


Must ReadView All

Textiles | On 19th Aug 2017

New fabric interfaces to interact with computers

As computer capabilities evolve, new fabric-based interfaces are...

Textiles | On 19th Aug 2017

Brazilian cotton prices drop in first fortnight of August

Cotton prices dropped in the Brazilian market in the first fortnight...

Apparel/Garments | On 19th Aug 2017

Target to acquire Grand Junction for faster deliveries

Target Corporation has announced that it has agreed to acquire Grand...

Interviews View All

Amit Jain
Shingora Textiles Ltd

‘In terms of fabric, the fastest growing category for us is a blend of...

Yashiki Gumber
Sahiba Fabrics

Fabric does not restrict us from fashion trends

Sanjay Desai & Ashish Mulani
True Colors

Digital textile printing will be the technology of the future

Mark Paterson
Technical Absorbents Ltd

Mark Paterson, R&D manager of Technical Absorbents Ltd talks about Super...

Steve Cole
Xerium Technologies

Steve Cole of Xerium Technologies discusses the industry. Xerium is the...

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...

Igor Chapurin
Chapurin

"Now we can see the Russian trend in international fashion. And Russian...

Judy Frater
Somaiya Kala Vidya

Among the many honours showered on Frater, including Fulbright and Ford...

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

August 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
66.7%
No
16.7%
Skip
16.7%

Total Votes: 30

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
43.3%
No
36.7%
Skip
20.0%

Total Votes: 30

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
83.3%
No
6.7%
Skip
10.0%

Total Votes: 30

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
60.0%
No
10.0%
Skip
30.0%

Total Votes: 30


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