Home / Knowledge / News / Textiles / Cotton market finally wake up
Cotton market finally wake up
08
Aug '08
NY futures traded sharply lower this week, with December dropping 312 points to close at 71.38 cents, while March fell 350 points to close at 76.39 cents.

After nearly four weeks of dull trading, the cotton market finally woke up and embarked on a wild ride that saw it drop 673 points between Friday and Tuesday, before it claimed half of these losses back by the end of today's session. Average trading volume increased to about 24'000 futures during the sell-off, but it quickly subsided to just about half of that when the market rebounded over the last two sessions.

The fact that open interest dropped by over 6'000 contracts as the market sold off signaled that this move was lacking momentum, since we need to see a rise in both volume and open interest to validate an emerging trend. Rather than new short positions being put on, it was spec long liquidation that led to this break, with the trade waiting at lower levels to buy some of its shorts back. Once it became evident that this dip had uncovered a decent amount of physical business, trade buying became more aggressive while specs were done liquidating, which allowed the market to recover some of this lost ground.

Continued weakness in outside markets combined with a break of long-term technical support (70.73 cents in December) were the main reasons for this precipitous drop in the cotton market. The CRB index broke through a one-year uptrend line earlier this week, which prompted a flood of liquidation by the fund sector.

There was a strong rumor that at least one major fund was forced into liquidating its position, which may have exacerbated the sell-off. It was further reported that for the month of July hedge funds suffered their worst monthly performance in over 30 years. With credit getting tighter and with Congress watching their every move, many of these highly leveraged funds are being forced to retrench and they certainly don't pose the same threat to the market when it comes to fueling the commodity bubble as they did at the beginning of the year.

Many analysts predict a strengthening of the US dollar over the coming months, which as the story goes should weaken commodity prices. However, we believe that any perceived 'strength' in the US dollar should be seen in the context of 'all boats are sinking', whereas the US currency may temporarily sink a bit slower than some of its counterparts, such as the Euro or the British Pound. But when measured against tangibles, including commodities, we believe that any of these overly abundant paper currencies will continue to lose value, meaning that nominal prices of just about everything should continue to rise over time.

Next week the USDA will release its first detailed look at the 2008/09 season. Last month the USDA predicted a global production gap of 11.0 mio bales, which the market doesn't seem to believe, otherwise we would not be trading in the low 70's. Even if we take out the'loss' adjustment, the statistical gap remains unrealistically high at 8.0 mio bales.

Must ReadView All

Textiles | On 27th Apr 2017

Maharashtra govt working on second textiles policy

The textiles department of the government of Maharashtra is working...

Apparel/Garments | On 27th Apr 2017

EC takes action to make garment sector more sustainable

The European Commission (EC) has presented a set of focused actions...

Textiles | On 27th Apr 2017

Seven new organisations join ZDHC Programme

The Zero Discharge of Hazardous Chemicals (ZDHC) Programme from...

Interviews View All

Cyril Pereira
Reed Exhibitions India, organiser of Asian Machine Tool Exhibition 2016

'Major problem in the textile machinery manufacturing industry is the lack ...

Anvita Mehra
Confidential Couture

‘It is going to take some time for Indian buyers to get accustomed to...

Abhishek Ganguly
Puma India

‘As a brand, Puma is always looking for new and innovative ways to inspire ...

Mark Paterson
Technical Absorbents Ltd

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

Lynda Kelly
Suominen Corporation

Suominen Corporation is a manufacturer of nonwovens as roll goods for...

Steve Cole
Xerium Technologies

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

Robert Brunner
Devereux

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

Wendell Rodricks
Wendell Rodricks

"We should not compare India and the West. There are things we do that...

Yash P. Kotak
Bombay Hemp Company

One of the directors of Bombay Hemp Company, Yash P. Kotak, speaks to...

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

news category


Related Categories:
April 2017

April 2017

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

SUBSCRIBE


Browse Our Archives

GO


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



X