Home / Knowledge / News / Textiles / Mills seem to struggle with recessionary economic environment
Mills seem to struggle with recessionary economic environment
18
Aug '08
NY futures remained under pressure this week, as December fell another 190 points to close at 69.48 cents, while March dropped 185 points to close at 74.54 cents.

The market continued to meander nervously in a narrow range between 68.54 and 71.74 cents this week, with a couple of short-lived spikes being generated by a friendly looking USDA report and a temporary bounce in outside markets. Other than that the cotton market did not have much to feed on and trading volume remained relatively subdued.

The only subtle change in regards to volume was the fact that the market is becoming more active on up days. For example, during yesterday's rally the market traded nearly 20'000 futures and over 16'000 options, while today's renewed collapse was probably in reaction to a lack of buying rather than any heavy selling, as just 9'000 futures and less than 6'000 options changed hands. This lack of momentum in the direction of the underlying trend, which currently is down, is often an indication that the trend is about to end, although this bottoming process may take some time.

Unlike other commodities, which have seen notable contractions in open interest since their prices peaked in late June, open interest in cotton has basically stayed unchanged, since it still measures about the same 216'000 futures contracts as it did back on June 26, when December traded about 12 cents higher than now.

Even when we look at the CFTC report, which provides us with a combined open interest figure for both futures and options, we have nearly identical numbers when we compare June 24 (378'675 contracts) to the latest available report of August 5 (380'635 contracts).

The market seems to be under the impression that spec long liquidation was the driving force behind the market's weakness, but when we look at the changes in open interest we get a slightly different story. Since June 24, large and small speculators went from a 41'000 contracts net long position in futures and options to a 1'000 contracts net short position, but less than 40% of this change came from long liquidation, while over 60% was due to new short positions. The net position of index funds on the other hand has not changed at all, as it is still around 104'000 contracts net long.

Merchants and mills have used this drop in the market to trade physical cotton and fix the price on existing on-call contracts, which prompted the trade to buy around 42'000 contracts net futures and options. The majority of that net buying, about 85%, covered existing short positions and only a small part went towards increasing long positions.

Therefore, the main feature over these last seven weeks, during which the market declined from the low 80s into to the high 60s was a handover of trade shorts to spec shorts, with the longs playing a relatively minor role in all this. The reason the market went down so hard is that speculators were shorting the market quite aggressively as technical levels were breached and outside market displayed weakness, while the trade seemed quite patient, buying and fixing the market only on fairly pronounced dips.

Must ReadView All

Textiles | On 23rd May 2017

Grasim’s VSF business net revenue up 12% in Q4 FY17

The viscose staple fibre (VSF) business of Grasim Industries has...

Apparel/Garments | On 23rd May 2017

Apparel, footwear use may rise by 63% in 2030: Report

The apparel and footwear consumption is projected to rise by 63 per...

Textiles | On 22nd May 2017

Maintaining NAFTA benefits is crucial: Cotton council

The US must remain a participant in a vibrant North American Free...

Interviews View All

Manuj Terapanthi
Texaura

Transparent supply chain and fair trade will boost sustainable market

Evelyne Cholet
UCMTF

‘France had a reputation of being big in new ideas, but poor in marketing...

Smita Murarka
Amanté

‘There is huge demand in the Indian lingerie market for non-wired styles.’

Larry L Kinn
Suominen Corporation

Larry L Kinn, Senior Vice President - Operations Americas of Suominen...

Kerem Durdag
Biovation II LLC

Kerem Durdag, CEO, Biovation II LLC, provides an insight into future...

Paolo Ocleppo
Sandvik Hyperion

Paolo Ocleppo, Rotary Cutting Segment manager, Sandvik Hyperion discusses...

Jay Ramrakhiani
Occasions Elegance Wear

It is believed that by early 19th century, Varanasi weavers had moved away ...

Sonam & Paras Modi
SVA

Sonam and Paras Modi's Sva Couture is synonymous with head-turning...

Madhu Jain
Madhu Jain

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

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:
May 2017

May 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