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

Courtesy: Michael Kors

Fashion | On 25th Jul 2017

Michael Kors to acquire Jimmy Choo

Global fashion luxury brand Michael Kors Holdings Limited has reached ...

Apparel/Garments | On 25th Jul 2017

VF Corp posts $2.4 billion revenue for Q2 2017

VF Corporation has recorded revenue of $2.4 billion, up 2 per cent,...

Textiles | On 25th Jul 2017

Egypt signs agreement with UNIDO for cotton production

Egypt has signed a €1.5 million ($1.74 million) cooperation agreement ...

Interviews View All

Headhonchos
Indian textile value chain

Adopt innovative techniques, go for automisation rather than being...

Yash Agarwal
Hitansh Online

Every market region has its own culture and trends

Karan Toshniwal
Orange O Tec

Contemporary industry is paying more and more attention to the...

Giorgio Mantovani
Corman S.p.A

Giorgio Mantovani, MD of Corman, with a presence in both Milano and New...

Kai Poehler
Voith Paper GmbH & Co. KG

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

Silke Brand-Kirsch
Schlegel und Partner

Silke Brand-Kirsch, executive partner of Schlegel und Partner, a leading...

Yash P. Kotak
Bombay Hemp Company

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

Igor Chapurin
Chapurin

"Now we can see the Russian trend in international fashion. And Russian...

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

July 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

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes No

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes No

Thanks for your valuable feedback. Claim your free latest sustainability e-book.


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



X