Home / Knowledge / News / Textiles / Futures market starts new calendar year on strong note

Futures market starts new calendar year on strong note

08
Jan '10
NY futures traded slightly lower since our last report on December 23, with March giving back 101 points to close at 72.89 cents.

Although the futures market started the new calendar year on a strong note by rallying to an intra-day high of 76.77 on Monday, it proved to be nothing more than a flash in the pan as values have since dropped by nearly 400 points. This correction seems to be the result of spec selling and index fund rebalancing, against which the trade has been a decent scale down buyer.

As expected we have seen the spread between the A-index and spot futures move back towards a more traditional difference recently. This morning the A-index measured 78.45 cents, while March closed at 72.89 cents, resulting in a spread of 556 points. Just a couple of months ago we had spot futures trading above the A-index, which is rather unusual and usually short-lived. Also, as of this morning we have once again a US quote (MOT at 79.25 cents) in the index after a five-month absence, which in our opinion is supportive because it signals that US cotton is competitive on the export front.

US exports were already quite strong before this week's price drop, as sales over the two-week holiday period amounted to no less than 583'200 running bales of Upland and Pima. Total commitments for the season now stand at 6.5 million statistical bales, whereof 3.6 million have so far been exported. Some analysts were disappointed about last week's export sales of 208'500 running bales, but we need to remember that if the US were to sell that amount every week, we would run out of cotton by the end of September.

We believe that the market does not yet fully appreciate how tight the US statistical situation is this season. We started last August with beginning stocks of around 6.3 million bales, to which we add the latest crop estimate of 12.6 million bales to arrive at total supply of 18.9 million bales. From that we need to subtract the 3.4 million that US domestic mill will have taken up by the end of July, which leaves 15.5 million bales available for export. Taking away the 6.5 million bales that have already been committed overseas leaves us with around 9 million bales that are still for sale. That may sound like a lot of cotton, but it really isn't! If we were to sell just 200'000 bales a week, it would take 45 weeks to completely sell out of everything and at 250'000 bales a week we would reach the end of the line in just 36 weeks, or by the first week of September.

Knowing that mills around the globe continue to be short-covered and that Chinese mills are now armed with import quotas of 8.7 million bales, we believe that US supplies will continue to dwindle rather quickly over the coming months. If we are correct with our assumption, it could have some interesting implications for the futures market. While merchants may see to it that carrying charges get rebuilt between March, May and July, current crop futures may eventually detach themselves from new crop since there will be very little cotton left for sale at the end of this season. We therefore would not be surprised to see a considerable inversion develop between July and December.


Must ReadView All

Pic: Shutterstock

Apparel/Garments | On 1st Apr 2020

Indian ministry asks over 10 manufacturers to produce PPE

The Indian health ministry has asked over 10 domestic manufacturers...

Pic: Venturelli Luca / Shutterstock.com

Retail | On 1st Apr 2020

H&M to take goods already manufactured, assures suppliers

Swedish retail giant H&M recently assured its garment suppliers of...

Pic: Shutterstock

Textiles | On 1st Apr 2020

India calls for allowing import sans certificate of origin

India has urged the countries with which it has free trade agreements ...

Interviews View All

Anshul Sood, Oceedee

Anshul Sood
Oceedee

‘Indian footwear market is nascent and largely a trend follower’

Ghanshyam Ghoghari, Kimora Fashion

Ghanshyam Ghoghari
Kimora Fashion

Bridalwear is not about reds and whites anymore

Headhonchos, Indian textile value chain

Headhonchos
Indian textile value chain

Adopt innovative techniques, go for automisation rather than being...

Tom,

Tom

<div>Inkbank is a leading supplier of inkjet inks and inkjet printing...

Sarah Perkins,

Sarah Perkins

Fairfax, Virginia-based Specialty Graphic Imaging Association (SGIA) is a...

Shivani Swamy,

Shivani Swamy

The Livinguard Technology is owned by Green Impact Holding AG based in...

Davide Vigano, Sensoria

Davide Vigano
Sensoria

Sensoria is a leading developer of smart garments and IoMe (Internet of...

Robert Brookins, Alexium International

Robert Brookins
Alexium International

Alexium International is a specialty chemical development company...

Suresh Patel, Sidwin Fabric

Suresh Patel
Sidwin Fabric

Sidwin Fabric is a manufacturer and exporter of polypropylene textiles and ...

Madhu Jain, Madhu Jain

Madhu Jain
Madhu Jain

She grew up in the walled city of Old Delhi, completed her studies, and...

Sidharth Sinha, Sidharth Sinha

Sidharth Sinha
Sidharth Sinha

<b>Sidharth Sinha</b> has contributed to the successful rebirth and...

Robert Brunner, Devereux

Robert Brunner
Devereux

Golfwear and menswear brand Devereux is set for greener pastures. Robert...

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


March 2020

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


Advanced Search