Home / Knowledge / News / Textiles / NY cotton futures slightly high last week
NY cotton futures slightly high last week
Feb '13
When the market reopened after the long Presidents Day weekend, it looked like May was ready to break out of its flagging pattern when it traded to a high of 85.24 cents on Wednesday. However, there was still enough opposition by the trade to reject further advances for now, forcing the market to retreat.

Trade shorts are obviously still convinced that their massive net short position in New York is warranted and that it will sooner or later pay off. According to the latest CFTC report as of February 12, which included the fallout from March options expiration, the trade had increased its net short position by an additional 0.6 million bales to 16.1 million bales. On the other side index funds expanded their net long to 7.8 million bales, while speculators were 8.3 million bales net long.

The liquidation of the March contract continued in an orderly fashion this week and open interest was down to just 5’581 contracts before today’s session. With the March/May spread trading at more or less full carry, we don’t believe that the certified stock of 360’541 bales (including bales under review) will have any major market impact as we head into First Notice Day tomorrow. There were 1’040 notices issued this afternoon, all by Allenberg, with a plethora of takers receiving them.

Although the market seems to have found some equilibrium after having rallied nearly ten cents over the last six weeks, the huge open interest in May is warning us that this may just be the calm before another storm. As of this morning, open interest in May amounted to 137’530 contracts, which compares to 72’000 to 95’000 contracts at the same date in the previous three seasons.

Only twice before has a spot month seen higher open interest than now, namely in February 2008 and in September 2010, when open interest in the most active month topped out near 150’000 contracts. What followed in both instances were parabolic short-covering rallies, first the infamous cash squeeze of March 2008 and then the epic rally in late 2010/early 2011.

The lesson to be learned from these two events is that a short-covering rally in the futures market does not necessarily have to be justified by fundamentals. In 2010/11 the physical market was leading the way, while in 2008 it didn’t participate at all. Ironically, a bearish market outlook can actually contribute to the set-up for a short squeeze. If nearly everyone in the trade is convinced that prices can’t possibly go higher and the short grows to a ‘critical mass’, it may actually set the stage for a big upward move. All that’s needed is a trigger that sets a short-covering rally in motion.

So where do we go from here? As we have pointed out last week, the trade will either have to get out or roll out of its big short by the time July goes off the board in four months. Remember, there exists an imbalance between spec longs (8.3 million bales) and trade shorts (16.1 million bales), because index funds don’t really play the liquidation game and will simply roll their net long from one futures month to the next. This set-up puts the trade at a certain disadvantage vis-à-vis speculators.

Must ReadView All

Textiles | On 24th Jul 2017

Govt extends deadline for GST composition scheme to Aug 16

The Government on India has extended the deadline for small...

L-R: Dhanapal, JMD, Best Corporation; Prabhu Damodaran, Convenor, ITF; Narayanasamy, MD, Micro Cotspin; Senthilnathan, MD Rasitex India; and Sabapathy, MD, Prasanna Spinning Mills

Textiles | On 24th Jul 2017

TN mills seek partnership with cotton growing states

Spinning mills in Tamil Nadu are seeking stronger partnership with...

Textiles | On 24th Jul 2017

Irani terms GST as a ‘great step towards transparency’

Union textiles minister Smriti Irani has termed the Goods and...

Interviews View All

Giovanni Pizzamiglio, Paolo Crespi & Riccardo Robustelli
Epson, For.Tex & F.lli Robustelli

‘The percentage share of printing in the global textile market is pretty...

Rahul Bhadani

Navigating through catalogues is a bit hasslesome

Dharmendra Shah
Ozone PB Spintex Limited

‘We have made huge investments to ensure quality yarn production.’

Johan Berlin
InvestKonsult Sweden AB

Investkonsult Sweden AB has been buying and selling second-hand textile...

Eric Scholler

The Indian market has huge potential in technical textiles, and by far,...

Mark Paterson
Technical Absorbents Ltd

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

Aditi Somani
Aditi Somani

Aditi Somani specialises in luxury fusion wear with international cuts and ...

Robert Brunner

Golfwear and menswear brand Devereux is set for greener pastures. Robert...

Nisha Chanda
Whistling Woods International School of Fashion

<div>A lack of upgraded courses in costume designing and fashion as per...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


Letter To Editor

(Max. 8000 char.)

Search Companies


July 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

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

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

Yes No

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

Yes No

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

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