Home / Knowledge / News / Textiles / New cotton crop offers remain uncompetitive
New cotton crop offers remain uncompetitive
28
Aug '09
The market made several futile attempts to get something going to the upside this week, rallying early in the session but getting rejected at the end of the day. After the technical damage the market sustained last week by violating a 5-month uptrend line, it came as no surprise that it would be difficult to generate any upside momentum.

Speaking of the chart, the market suffered additional setbacks this week, first by braking through the 58 cents support level in December, which dashed any bullish hopes for a double bottom formation, and then by penetrating through the weekly uptrend line dating back to March. On the latter there is still a chance to put a positive spin on things if the market somehow manages to rally 100 points tomorrow to post a close above that trendline.

Although the chart doesn't look inspiring and we shouldn't expect much more than a relief rally due to oversold conditions in the near term, we are not too worried about the market falling apart from current levels. When prices broke through 58 cents we saw a spike in volume for a couple of days as some sell stops were triggered, but there was no follow-through selling when the market dipped below 57.00 cents this morning, as less than 5'000 contracts were traded all day and the options market was even more disengaged with fewer than 2'500 contracts changing hands.

The same cannot be said of the physical market, which has turned quite active lately as evidenced by the latest export sales report. For the week ending on August 20 there were 243'700 running bales of Upland and Pima sold to no less than 23 different markets, which brings total commitments for the current marketing year to 2.95 million statistical bales. Shipments amounted to 215'000 running bales, bringing total exports so far to about half a million statistical bales. From what we can tell export sales continued at a decent pace this week and this demand, along with the many mill fixations that are waiting on a scale down basis, should provide the market with a strong layer of support from current levels on down.

Although US cotton has been competitive during this latest round of sales, almost all of this business consists of old crop remnants, while new crop offers remain uncompetitive at the moment. When we calculate how much US old crop is still unsold, we come up with around 2.0 million bales. Starting with beginning stocks of 6.1 million at the 1st of August, we subtract export commitments (estimated at 3.2 million including this week's sales) and at least three months of domestic mill use (0.9 million bales). This leaves around 2.0 million bales, which is substantially less than last season, when unsold inventories amounted to roughly 4.4 million bales at this point in time.

In other words, it will only be a matter of time before these old crop supplies run out and then it will be the market's task to get US new crop into the marketing channels. For that to happen we need a wide enough AWP/futures spread in order to lure new crop cotton out of the loan. Based on next week's AWP of 46.13 cents, the current spread to December futures amounts to just 1151 points, which is about 4 to 5 cents shy of what it needs to be. The question is how will this spread be allowed to widen? Are world prices going to fall while futures hold steady or will there be a rally in futures?

Must ReadView All

Textiles | On 26th May 2017

Lenzing unleashes new eco-friendly fibre

There's a new eco-friendly fibre on the anvil—Austrian speciality...

Apparel/Garments | On 26th May 2017

Benetton seeks approval for FDI in single-brand retail

Global fashion brand Benetton Group, has sought Indian government's...

Apparel/Garments | On 26th May 2017

Walmart to conduct GST workshops for SME suppliers

With the objective of supporting its small and medium-sized (SME)...

Interviews View All

Karin Ekberg
Leadership & Sustainability

Sustainable models are beneficial for brands, retailers and manufacturers

Yashiki Gumber
Sahiba Fabrics

Fabric does not restrict us from fashion trends

Sunil Rathore
Lacoste India

‘New vendor is welcome if he offers cost, quality and timely delivery’

Urs Stalder
Sanitized AG

Urs Stalder, CEO, Sanitized AG, talks about the increasing use of hygiene...

Eamonn Tighe
Nature Works LLC

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

Giorgio Mantovani
Corman S.p.A

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

Rupa Sood and Sharan Apparao
Nayaab

Nayaab, an exhibition meant to celebrate Indian weaves, is in its second...

Igor Chapurin
Chapurin

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

Wendell Rodricks
Wendell Rodricks

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

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