Home / Knowledge / News / Textiles / Sharp correction ensues in NY cotton futures
Sharp correction ensues in NY cotton futures
31
Jul '09
NY futures have retreated since our last report on July 16, with December dropping 335 points during this two-week period to close at 60.11 cents.

After the market had advanced by more than 1000 points in exactly a month, reaching a high of 64.98 cents on July 21, the rally finally ran out of steam and a sharp correction ensued.

In order to keep this steep uptrend going, the market needed a continuous supply of fresh buying, but after open interest had increased by nearly 25'000 contracts during the course of this rally, it became increasingly difficult to find buyers once the market approached the 65.00 cents level. Markets are sometimes able to extend a rally thanks to short-covering, but that was not the case here because speculators had hardly any shorts left to cover, while trade shorts consisted of stubborn hedges against physicals and on-call sales. As we have learned last year, large trade short positions can be vulnerable to cash flow issues, but this time around there was no panic discernible among traders.

Once there was a void of buying, the market quickly fell by nearly seven cents in just five sessions, but it encountered decent trendline support above 58.00 cents. The uptrend line we are talking about extends back about 5 ½ months to early March, which is where the current trend originated at around 46.00 cents.

This correction certainly made sense from a fundamental point of view, because futures prices had advanced about three times as much as physical prices in this spec-induced rally. This sharp drop in the futures market should allow merchants to profitably sell some of their recently established basis-long positions, which in turn would act in support of the market as futures are being bought back.

US export sales have slowed down considerably in recent weeks owing to these higher prices, with today's report showing net new sales of just 103'700 running bales of Upland and Pima for both marketing years. This brings total sales for the current season to 14.3 million statistical bales, of which 12.9 million has so far been exported. The pace of shipments has been slower than expected over the last few weeks, which means that we will probably fall about 0.2 million bales short of the current USDA projection of 13.3 million bales.

Of note is that total outstanding commitments for both seasons are currently at just 2.6 million statistical bales, which is 1.3 million less than at the same time last year. Mills are obviously not willing to extend coverage in these uncertain economic times. This can be interpreted as friendly, because by running tighter coverage mills can't stay away from the market for too long.

The demand side of the equation is always the more difficult to get right, especially in tough economic times like these. When the financial crisis hit last fall, analysts were quick to substantially scale back demand numbers, but they may have overreacted! When trying to gauge the level of demand, we prefer to look at production and then add or subtract the change in stocks. Based on this methodology we feel that the USDA world demand number of 110.3 million bales is close to reality; it may even be a bit conservative based on what we are seeing with stock levels.


Must ReadView All

Courtesy: Kai Pilger from Pexels

Textiles | On 24th Apr 2018

Pakistan’s textile exports up 7.77% in July-March FY18

The value of textile and garment exports from Pakistan increased by...

Alliance to form joint entity for safety in factories

Apparel/Garments | On 24th Apr 2018

Alliance to form joint entity for safety in factories

On the 5th anniversary of the Rana Plaza Collapse, The Alliance for...

China’s Alibaba partners with Thailand for digital trade

Textiles | On 24th Apr 2018

China’s Alibaba partners with Thailand for digital trade

China’s Alibaba Group recently signed an agreement with the Thai...

Interviews View All

Dinaz Madhukar
DLF Emporio and DLF Promenade

‘Each event and promotion is planned out keeping in mind the business of...

Nitin Bhatia
Trend Arrest

Setting up a brand for online selling is easy, but running the brand is not

Stefan Warnaar
Peak to Plateau

People are willing to pay for quality and performance

Kalai Selvi

Vidyashilp Academy in Bengaluru is the country's first Fairtrade School....

Hardik Sanghvi

Idealin Fogging Systems has been engaged in designing and manufacturing...

Rikesh Mistry

Jupiter Comtex Pvt Ltd, established in 1973, started its textile machinery ...

Eamonn Tighe
Nature Works LLC

Eamonn Tighe, Fibres and Nonwovens - Business Development Manager of...

Paolo Ocleppo
Sandvik Hyperion

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

Marten Alkhagen
Swerea IVF AB

Marten Alkhagen, Senior Scientist - Nonwoven and Technical Textiles of...

Tony Ward
Tony Ward

"You have to truly understand what your client wants, know her needs, what ...

Amiben Shroff
Shrujan

From its modest beginning in the late 1960s, Shrujan has grown into a...

Silvia Venturini Fendi
Fendi s.r.l

"Yes, my confidence and positive attitude are my strengths and should be...

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

Leave your Comments


April 2018

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

Active Poll

Do you see sustainability as a route to business growth?

Yes
69.9%
No
12.6%
Skip
17.5%

Total Votes: 103

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

Yes No

Active Poll

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes
63.1%
No
29.1%
Skip
7.8%

Total Votes: 103

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

Yes No

Active Poll

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

Yes
87.4%
No
8.7%
Skip
3.9%

Total Votes: 103

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

Active Poll

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

Yes
82.5%
No
7.8%
Skip
9.7%

Total Votes: 103


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