Home / Knowledge / News / Textiles / Dec & March drop pull down NY cotton futures this week
Dec & March drop pull down NY cotton futures this week
08
Nov '14
December lost 131 points to close at 63.19 cents/lb, while March dropped 74 points to close at 62.28 cents/lb, which pulled down New York cotton futures this week.

“It was another uneventful week in the cotton market, as values continued to move within a very narrow trading range,” the latest Plexus market report informs.

Since October 6, the March contract, which as of today owns the highest open interest, has closed no lower than 61.71 cents and no higher than 63.27 cents, a range of just 156 points in 24 sessions.

December, the soon to expire spot month, has seen a little more movement with a 306-point range, but even that is nothing to get too excited about.

The market still appears to be boxed in between strong resistance stemming from a global oversupply scenario that is likely to persist for quite a while, while support comes mainly from government programs in the US and India that keep supply pressures in check.

Government support is changing the behaviour of market participants, as it keeps potential short sellers from getting too aggressive, while allowing growers to hold on to their cotton longer than they otherwise would.

The US marketing loan program pays growers 52 cents/lb for their cotton, which corresponds to over 80% of its current market value. The grower then has 9-10 months to redeem his cotton at the AWP, which is determined by the A-index.

In the current market environment a grower expects the AWP to move lower over the coming months, which would allow him to get his cotton back at a cheaper price.

Paradoxically, the more bearish producers are, the longer they may leave their cotton in the loan in anticipation of a falling AWP. This behaviour in turn restricts the supply coming into the marketplace, which counterbalances bearish forces.

The matter has been further complicated by lower payment limitations for growers this season, which makes it more difficult to trade cotton in equity form, for fear of owing the government some money back if marketing loan gains were to exceed payment limitations.

In a nutshell, it may be more difficult to get cotton out of grower hands than in previous seasons.

A similar situation exists in India, where the CCI has started to procure cotton at the MSP (Minimum Support Price) in several states, which has kept cash prices fairly stable just shy of 70 cents.

Even if the government ended up buying only 10% of the crop, which would equate to around 4 million local bales, it would probably be enough to keep Indian prices well supported.

The psychological effect of these programs can be quite potent, because the perception of a safety net will keep growers from panicking, while mills are more confident to buy near the MSP and traders are reluctant to undercut prices.

Statistically the ROW should see its stocks grow by around 7 million bales this season and since both the US and Indian governments are not going to hold on to stocks indefinitely, this extra supply will sooner or later filter into the marketplace.

Must ReadView All

Courtesy: Li & Fung

Textiles | On 29th Mar 2017

Li & Fung introduces new 3-year plan 2017-2019

Li & Fung Limited has outlined its next Three-Year Plan (2017-2019)...

Courtesy: Carrington

Apparel/Garments | On 29th Mar 2017

Carrington Workwear signs JV with TMG Textiles

Carrington Workwear, one of the largest producers of workwear fabrics ...

Apparel/Garments | On 29th Mar 2017

Jabong launches Aeropostale on its platform

Jabong has added leading American high-street fashionwear brand,...

Interviews View All

Mandeep Nagi
Shades of India

Women value something that is unique and has a flavour of India

Claudia Kersten
Global Organic Textile Standard

‘GOTS is a very efficient supply chain management tool, especially for...

Nitin Bhatia
Trend Arrest

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

Iago Castro Asensio
RCfil Distribuciones S.L.

Iago Castro Asensio, International Business Manager of RCfil...

Kai Poehler
Voith Paper GmbH & Co. KG

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

Eamonn Tighe
Nature Works LLC

Eamonn Tighe, Fibres and Nonwovens - Business Development Manager of...

Karan Arora
Karan Arora

Bridal couture created with rich Indian heritage, exquisite craftsmanship...

Tony Ward
Tony Ward

"You have to truly understand what your client wants, know her needs, what ...

Ritu Kumar
Label Ritu Kumar

‘Classics will return’ "There are a lot of people wearing western clothes ...

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
March 2017

March 2017

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

SUBSCRIBE


Browse Our Archives

GO


eNEWS
Insights
Subscribe today and get the latest News update in your mail box.
Advanced Search