Home / Knowledge / News / Textiles / Cotton market experiences some erratic up & down sessions
Cotton market experiences some erratic up & down sessions
05
Jun '09
NY futures moved higher this week, with July gaining 265 points to close at 56.88 cents and December rallying 298 points to close at 61.09 cents.

The cotton market experienced some erratic up and down sessions this week, as it seemed to be torn between support stemming from outside markets and pressure emanating from a growing certified stock ahead of the notice period.

A sharply weaker dollar and a rally in the commodity complex allowed the cotton market to ride along early in the week. Looking at open interest and spec/hedge figures, it seems that the bounce was primarily a function of short-covering by the trade combined with a lack of selling, at least until we reached higher grounds. Although there were some new spec long positions established since early March, it has certainly not been of the same proportion as we have seen in other commodities, but that may be yet to come.

Once again physical prices resisted following the futures market higher to the same extent and this caused this latest rally attempt to stall as July approached 59 cents. Also, the fact that the certified stock continues to grow rapidly, measuring now over 350'000 bales including the "under review" category, did not help the bulls' cause at this juncture. However, as we have tried to point out last week, the certified stock issue can be solved in two ways.

Either a taker is attracted by a cheap price, or he may take it based on a wide enough difference between July and December. As expected we have seen the July/Dec spread widen further this week and we are slowly but surely approaching a level at which takers may step forward. We believe that a spread of at least 450 points or more is needed to see this scenario play out.

We have talked repeatedly about the importance of the US dollar when it comes to forecasting commodity prices or any other asset class for that matter. If the currency in which such assets are denominated in gets debased, then the nominal price of these assets is almost certain to go up. History is replete with examples of what happens when currencies lose their footing; the most prominent is probably the "Weimar Republic" episode that unfolded in Germany in the early 1920's, which led to hyperinflation and ultimately the demise of the Reichsmark.

John Maynard Keynes described the situation back then as follows: ".belligerent governments, unable, or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance." This sounds eerily familiar to the situation we are currently in, except that we seem to already have exhausted the option to secure more loans and are unable to tax an economy that is flat on its back.

It is more than a bit ironic when the Treasury Secretary of a nation that used to be the "Beacon for Capitalism" has to go hat-in-hand to its "Socialist Lender", trying to reassure the biggest foreign owner of US debt that everything is just fine, only to be laughed at by the student audience he was addressing. According to Reuters, Treasury Secretary Geithner drew loud laughter from Peking University students after he commented that "Chinese assets are very safe".


Must ReadView All

Apparel/Garments | On 26th Jun 2017

GSTN registration reopens

E-commerce operators and TDS (tax deducted at source) deductors can...

Textiles | On 26th Jun 2017

Expedite release of ROSL pending claims: TEA to Centre

The Tiruppur Exporters' Association (TEA) has again urged Union...

Textiles | On 26th Jun 2017

'Export promotion schemes to continue under GST regime'

The export promotion schemes will continue under GST regime, said...

Interviews View All

Kamlesh Vaghela
RK Textiles

Very few machinery manufacturers have R&D units

C. Dhandayuthapani
Mag Solvics Pvt. Ltd

ITME 2016 exploited our full strength like never before

Abhishek Samdaria
Reflete

GST will certainly reduce a lot of paperwork in future

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...

Paolo Ocleppo
Sandvik Hyperion

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

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...

Sanjukta Dutta
Sanjukta's Studio

<b>Sanjukta Dutta</b> creates unique garments by clubbing prints of...

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:
July 2017

July 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