Home / Knowledge / News / Textiles / NY futures stuck in middle of six-month sideways trend
NY futures stuck in middle of six-month sideways trend
03
Aug '13
Traders have remained rather indecisive, as they are torn between a tight supply situation nearby that justifies firm prices until new crop arrives and a potentially bearish outlook thereafter.

As a result we have a market that is stuck right in the middle of a 6-month sideways trend, marked by a low of 81.72 and a high of 89.56 in December. While the market hasn’t been able to generate any directional moves lately, the tight nearby supply scenario has forced the Dec/March spread out to an inversion of nearly 200 points.

Even though it may seem like there is not much going on, with December closing the last 27 sessions in a narrow range of less than 300 points, there are nevertheless a number of developments that have the potential to yank the market out of its comfort zone.

There is the certified stock for example, which has all but disappeared in July, dropping from 623’861 bales on July 2nd to just 71’848 bales as of this morning. When we combine this low availability of certified stock, or any cash cotton for that matter, with the massive trade net short position in NY futures, plus the fact that the US crop is late, we have the perfect set-up for a short-covering rally at some point between now and November.

According to the latest CFTC report, the trade net short position amounted to 13.6 million bales as of July 23, which was nearly twice as large as the 7.1 million bales net short of a year ago. Even though the US crop is estimated to be some 4 million bales smaller this season, which means that there are fewer bales to hedge, the trade has been on a tear to short the futures market. Merchants and farmers seem to adopt a ‘better safe than sorry’ attitude, seeking protection against a sudden change in China’s price support policy, which has the potential to turn the cotton market upside down. 

For liquidity reasons most of these trade shorts have been put on in the December contract, considering that 85% of open interest belongs to the front month. By comparison, last year it amounted to just 76%, on a smaller position! So we have a rather substantial trade short in December, with hardly any certified stock left and not much cotton in the pipeline to replace it, since current crop cotton is nearly all spoken for and new crop may arrive a little late for delivery.

So far the shorts have kept their cool, waiting for a chance to roll their positions forward at something better than 200 points negative carry. The hope is that the 6.5 million bales net spec longs will blink first and liquidate, be it because of a bearish announcement out of China or some negative news on the macro front. Then there is always the Index fund roll, which will provide 7.0 million bales of liquidity, although that opportunity won’t arrive until late October/early November.

The worry is that in the meantime something spooks these trade shorts into covering. Weather is high on the list of potential catalysts, because it has been rather unusual so far this season, with many records broken on both sides of the spectrum.


Must ReadView All

Courtesy: BekaertDeslee

Textiles | On 23rd Oct 2017

BekaertDeslee to expand North American facility

BekaertDeslee, one of the largest manufacturer of mattress textiles...

Courtesy: A&E

Textiles | On 23rd Oct 2017

A&E unveils Magic using Repreve sewing thread

American & Efird (A&E), a leading developer of industrial and...

Courtesy: Messe Frankfurt

Textiles | On 23rd Oct 2017

Over 4,000 exhibitors attend Intertextile Shanghai 2017

Another successful Intertextile Shanghai Apparel Fabrics has wrapped...

Interviews View All

Nitin Bhatia
Trend Arrest

Setting up a brand for online selling is easy, but running the brand is not

Neel Sawhney
One Friday

‘The share of kidswear segment in the online sector is still small in...

Priyanka
Studio Priyanka Rajiv

‘To reinvent the age-old tradition of embroidery to suit demographics and...

Abhishek Pachauri

Reckon Industries adapts latest systems for manufacturing from designing...

Hardik Sanghvi

Idealin Fogging Systems has been engaged in designing and manufacturing...

Harsh Shah

Established in 1956 with a small beginning, Embee today manufactures a...

Marcel Alberts
Eurofibers

Coating at a fibre level is a practice not usually seen in the...

Kai Poehler
Voith Paper GmbH & Co. KG

The glass mat industry is growing by five to eight per cent annually. Kai...

Marten Alkhagen
Swerea IVF AB

Marten Alkhagen, Senior Scientist - Nonwoven and Technical Textiles of...

Prathyusha Garimella
Prathyusha Garimella

Hyderabad-based designer <b>Prathyusha Garimella</b> is known for blending ...

Madhu Jain
Madhu Jain

She grew up in the walled city of Old Delhi, completed her studies, and...

Bani Batra

Bani Batra’s couture wedding collection is inspired by traditional Indian...

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

October 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
76.1%
No
12.7%
Skip
11.3%

Total Votes: 71

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
62.0%
No
28.2%
Skip
9.9%

Total Votes: 71

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
85.9%
No
9.9%
Skip
4.2%

Total Votes: 71

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
76.1%
No
11.3%
Skip
12.7%

Total Votes: 71


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