Higher cotton prices to see slow down in textile consumption
02 Feb '08
3 min read
However, February brings us First Notice Day for the March contract. Therefore, May futures will become the spot month suggesting it is likely that Asian mills must increase their offering price some 150 to 200 points.
Export shipments totaled 211,200 RB on the week and were comprised of 185,500 RB of Upland and 25,400 RB of Pima. Primary destinations of Upland were Mexico (34,400 RB); China and Turkey. Primary destinations of Pima were India (8,200 RB); Pakistan and China.
There are very mixed signals regarding the health of their respective textile economies surfacing from various countries. However, it is noted that world consumption is slowing; or rather the growth rate is slowing.
Net textile consumption is not declining, but rather has slowed to a near zero growth rate. Yet, with higher cotton prices it is logical to see some slow down in textile consumption. However, world production is also declining and in turn that will allow for cotton prices to move higher.
With the December contract pressing 77 cents, the 80 cent objective remains the next hurdle. That barrier is not likely to be breached until after the planting season has been completed.
Nevertheless, it is too early to begin pricing the 2008 crop. Those growers needing to offset some of their price risk could consider buying put option under the market, but will likely need to roll those puts higher as the market climbs.
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.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "UBM China (Shanghai)")
-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
