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Plexus cotton market report
23 Jun '07
3 min read
Since nearly all of these remaining longs belong to index funds, the cotton trade has really gone all out short and its net short position in futures probably exceeded 14.0 mio bales as of last Friday. The CFTC report, which reports both futures and options positions, showed the trade 11.4 mio bales net short as of June 12, but this position has continued to grow over the last seven sessions since then.
Even though most of these trade shorts are against physical long positions or on-call sales, the dilemma many shippers are facing right now is that the futures market has gained a lot more ground than the cash market.
With the market up nearly 10 cents, the average hedge short has probably lost some 7 or 8 cents, while prices paid by mills are 'only' up 5 or 6 cents, which would result in a loss on this basis-long position. For this reason most shippers are very reluctant to drop their offering rates to mills unless the futures market gives them a break, but so far this has not happened.
The problem, from a mill's point of view, is that time is not on their side. According to the latest US export sales report of this morning, over 88% of the 230'300 running bales of Upland and Pima were sold for June/July shipment, and the story is much the same in foreign growths, which highlights the fact that mills are not very well covered and that they generally don't have the luxury to wait for prices to move lower.
Some mills are beginning to realize that they may be behind the curve in this game and they have started to pay some of these higher asking prices over the last seven to ten days.
Click here to read more:
Even though most of these trade shorts are against physical long positions or on-call sales, the dilemma many shippers are facing right now is that the futures market has gained a lot more ground than the cash market.
With the market up nearly 10 cents, the average hedge short has probably lost some 7 or 8 cents, while prices paid by mills are 'only' up 5 or 6 cents, which would result in a loss on this basis-long position. For this reason most shippers are very reluctant to drop their offering rates to mills unless the futures market gives them a break, but so far this has not happened.
The problem, from a mill's point of view, is that time is not on their side. According to the latest US export sales report of this morning, over 88% of the 230'300 running bales of Upland and Pima were sold for June/July shipment, and the story is much the same in foreign growths, which highlights the fact that mills are not very well covered and that they generally don't have the luxury to wait for prices to move lower.
Some mills are beginning to realize that they may be behind the curve in this game and they have started to pay some of these higher asking prices over the last seven to ten days.
Click here to read more:
Plexus Cotton Limited
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