Home / Knowledge / News / Textiles / Charming days for cotton market

Charming days for cotton market

26
Sep '09
NY futures were able to consolidate recent gains, with December advancing 63 points this week to close at 64.81 cents.

The cotton market made a strong statement today! Neither a weak stock market nor a dollar rally were able to stop cotton in its tracks, as it managed to shrug off a 100 points decline earlier in the session to close at the highest level since July 20.

There is a big difference to the last two times the market challenged the 65 cents level! Back in July and August the US crop still looked promising, but now there are a lot of unanswered questions regarding the size and quality of the US crop after large parts of the Mid-South and Southeast received way too much moisture in recent weeks. It will probably take another month or two before we have a clearer picture of what this crop looks like, but traders are certainly much more reluctant to add to their already considerable futures short position amidst all this uncertainty.

On the other hand we have trend-following speculators jumping back into the cotton market, with the conviction that "the third time's a charm" and that values will finally break above the 65 cents barrier. Since this latest rally started on August 27, daily trading volume has improved noticeably and open interest jumped from 123'335 to 146'248 contracts, which tells us that there has been a lot of momentum behind this move.

When we look at the latest CFTC report as of September 15, we can clearly see that speculators were driving this market north, while the trade continued to sell into strength. The net positions of the main players and the changes to the previous week look as follows:

Index Funds = 7.5 million bales net long (+ 0.1 million)
Speculators = 2.1 million bales net long (+ 1.3 million)
Trade = 9.6 million bales net short (+ 1.4 million)

As we have stressed repeatedly, the fact that Index Funds own such a large block of the net long position poses a problem, because it creates an imbalance between price sensitive longs and shorts. As long as there is no reason for shorts to cover their positions, nothing will happen, but when there is a scenario in which shorts want to get out (changed market outlook) or need to get out (margin calls), then who will be there to take their shorts from them? Speculators are only 2.1 million bales net long and they have an appetite for more longs in an uptrend like this. Index Funds, as we have learned, are driven by money flows and have no eyes for the market as such. They will not sell any of their positions until money flows reverse.

Due to the recent weather problems in the US we may have arrived at a point where the trade not only stops selling, but it may actually start buying call options or call spreads to protect its futures short position. Also, since new crop is not available in any volume, there is really not much to sell against at the moment and putting on more basis-longs in foreign growths may be risky since the weather problems in the US could cause the basis to weaken considerably.


Must ReadView All

Pic: Shutterstock

Textiles | On 21st Aug 2019

Chinese fabric firm mulls entering Philippines

Chinese firm Texhong Textile Group Ltd, which manufactures yarns and...

Pic: Shutterstock

Retail | On 21st Aug 2019

US shoppers embrace subscription service, AR as tools: GfK

Augmented reality (AR) and subscription services are enthusing US...

Pic: Shutterstock

Textiles | On 21st Aug 2019

Khadi items sale saw 145% growth from 2014-15 to 2018-19

The Khadi and Village Industries Commission's (KVIC) turnover crossed ...

Interviews View All

Saket Garg, Garg Corporation

Saket Garg
Garg Corporation

The biggest challenge is lack of skilled workforce and competition from...

Dinaz Madhukar, DLF Emporio and DLF Promenade

Dinaz Madhukar
DLF Emporio and DLF Promenade

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

Smarth Bansal, Colorjet India Limited

Smarth Bansal
Colorjet India Limited

We would like to venture more companies into the Indian market

John Kelley,

John Kelley

Textile Events is one of the largest textile fair in the United Kingdom,...

Tom Adeyoola,

Tom Adeyoola

Describing itself as the best body shape and garment fit company in the...

Farheen B Rahman & Priti Jain,

Farheen B Rahman & Priti Jain

Founded by business-designer duo <b>Priti Jain and Farheen Rahman</b>,...

Madison Maxey, Loomia

Madison Maxey
Loomia

Loomia designs and manufactures soft circuit systems that can be produced...

Ayyappa Nagubandi, Broadcast Wearables Pvt Ltd

Ayyappa Nagubandi
Broadcast Wearables Pvt Ltd

Hyderabad-based Broadcast Wearables has come up with the country's first...

Justin Chan & Shyam Gollakota, University of Washington

Justin Chan & Shyam Gollakota
University of Washington

A fabric that can store data without any electronics or batteries has been ...

Yash P. Kotak, Bombay Hemp Company

Yash P. Kotak
Bombay Hemp Company

One of the directors of Bombay Hemp Company, Yash P. Kotak, speaks to...

Hemant & Nandita, Hemant & Nandita

Hemant & Nandita
Hemant & Nandita

The designer duo of Hemant &amp; Nandita are known for being inspired by...

Prathyusha Garimella, Prathyusha Garimella

Prathyusha Garimella
Prathyusha Garimella

Hyderabad-based designer <b>Prathyusha Garimella</b> is known for blending ...

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


August 2019

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

news category


Related Categories:

Advanced Search