Home / Knowledge / News / Textiles / NY futures explode to the upside this week
NY futures explode to the upside this week
Mar '11
NY futures exploded to the upside this week, with May rallying 2847 points to close at 205.70 cents, while December gained 1106 points to close at 126.80 cents.

The main feature this week, apart from May climbing back above the 2-dollar mark, was the widening of the spread between current and new crop futures. Since last Thursday the May/Dec spread has expanded by no less than 1741 points, going from 6149 points to 7890 points, based on today's close.

Trade shorts in May and July are learning in a rather painful way that the promise of a huge crop next season won't solve the predicament they are currently in. For current crop shorts there are only two options - either buy out of it or deliver cotton to the board. Since the second option is not a realistic one in a nearly sold out cash market, shorts have really no other choice but to buy their way out of trouble. However, in order to do so they need willing sellers, be it longs booking profits or new shorts entering the market. Both are not easy to find in the current market.

According to the latest CFTC spec/hedge report (futures and options), the existing net long position is about equally split between index funds and speculators/hedge funds. As of February 22, index funds owned a 4.8 million bales net long position, while all remaining speculators accounted for a 5.0 million bales net long. On the other side was the trade with a 9.8 million bales net short position. Since index funds are an investment vehicle and therefore react to money flows rather than market movement, the imbalance between "market driven" net longs and shorts is roughly 1-to-2, or 5.0 million spec net longs versus 9.8 million trade net shorts.

However, the story gets even more interesting when we separate these positions by crop year. If we assume that around 1/3rd of these positions belongs to new crop (December and later), then the imbalance between "market driven" longs and shorts is even more pronounced. Let's say that around 7.0 million of the 9.8 million bales are in current crop. Since all of the 4.8 million bales in index fund net longs are in the front month, it would leave only 2.2 million in spec net longs against 7.0 million in trade net shorts. In other words, the ratio between "market driven" longs and shorts would shift to more than 1-to-3.

This may explain why May and July move up the limit so easily day after day. There is simply not enough liquidity on the sell side to accommodate the many shorts that want out. This liquidity impasse can only be solved by a) new short sellers entering the market, which is not likely at the moment or b) index funds rolling forward, which is not going to be the case until the end of March. Once the rolling period begins, May shorts will encounter enough liquidity to transfer their position to July. However, July will mark the end of the line for these shorts, since rolling into December at a 70 cents discount is not an option.This is worrisome, because unless open interest gets greatly reduced somehow over the next couple of months, the July contract could end with a big firework.

Must ReadView All

Courtesy: Kornit Digital

Textiles | On 28th Feb 2017

'Customisation is an advantage of digital printing'

Changing business models and companies' decision to reduce their...

Textiles | On 28th Feb 2017

China's textile & apparel exports up 10.2% in Jan 2017

Exports of textiles and garments from China resumed growth in the...

Apparel/Garments | On 28th Feb 2017

Delta Galil's Q4 operating profit jumps 80%

In the three months to December 31, 2016, operating profit at apparel ...

Interviews View All

Rajiv Sirohi

‘Portugal is taking away a major share of the mill made sector.’

Claudia Kersten
Global Organic Textile Standard

‘GOTS is a very efficient supply chain management tool, especially for...

Kaizad Hansotia

Competition is the best thing that can happen to a startup

Eric Scholler

The Indian market has huge potential in technical textiles, and by far,...

Ashok Desai
Bombay Textile Research Association

Bombay Textile Research Association (BTRA) is a leading name in textile...

Johan Berlin
InvestKonsult Sweden AB

Investkonsult Sweden AB has been buying and selling second-hand textile...

Igor Chapurin

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

Ritu Kumar
Label Ritu Kumar

‘Classics will return’ "There are a lot of people wearing western clothes ...

Pranav Mishra

Designers Pranav Mishra and Shyma Shetty’s Huemn is known for its...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


Letter To Editor

(Max. 8000 char.)

Search Companies

February 2017

February 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.


Browse Our Archives


Subscribe today and get the latest News update in your mail box.
Advanced Search