QUOTE AND NEWS
The Hindu Business Line  2 hrs ago  Comment 
Low prices of crude oil, lesser purchasing power of oil producing nations will affect the fibre’s prospects
Forbes  Jan 7  Comment 
US commodities trading and agribusiness software provider The Seam, which has cleared or processed over $7 billion through its cloud-based platforms, is forming a blockchain consortium in conjunction with IBM for the billion dollar global cotton...
Agrimoney.com  Jan 6  Comment 
Prices of dryland, irrigated cropland and ranchland drop in the top cotton and beef-producing state for the first time in eight years
The Hindu Business Line  Jan 6  Comment 
ICAC says higher supply will drag prices; Indian production seen up by 4%
The Hindu Business Line  Jan 6  Comment 
Cotton price remained unchanged as demand was limited from domestic mills and exporters at the higher level. Though, kapas or raw cotton gained marginal on strong demand from oil seed crushers and ti...
Benzinga  Jan 6  Comment 
The USDA reported today that cotton weekly export sales for the current marketing year for the period ending December 29th totaled 183,700 running bales. Sales were down 47 percent from previous week and down 45 percent from the four week average....
The Hindu Business Line  Jan 5  Comment 
Majority of oils in Indore mandis traded higher on improved global cues and physical demand with soya refined being quoted at ₹732-36, while soy solvent ruled at ₹700-705. Cotton oil ruled higher at...
Benzinga  Jan 5  Comment 
March New York Cotton is trading at 74.47, up 0.39 cents/lb. May New York Cotton is trading at 74.63, up 0.41 cents/lb. Cotton futures are trading higher early Thursday morning. Market chatter about economic growth and U.S. cotton planting...
DailyFinance  Jan 4  Comment 
Filed under: Lifestyle, Health & Wellness A professional medical organization has issued new recommendations about earwax. On January 3, the American Academy of Otolaryngology—Head and Neck Surgery Foundation published updated guidelines...
Benzinga  Jan 4  Comment 
March New York Cotton is trading at 71.88, up 0.10 cents/lb. May New York Cotton is trading at 72.17, up 0.05 cents/lb. Cotton futures are trading steady early Wednesday morning. Market chatter about economic growth and demand for U.S....




RELATED WIKI ARTICLES
 
TOP CONTRIBUTORS

Cotton is a basic crop that is a major input for the textile, agriculture, and food industries. 64 percent of cotton is used for apparel, 28 percent for home furnishings, and 8 percent for industrial products. In the US, $120 billion of business revenue is stimulated by cotton.[1]

The U.S. is a major cotton producer, but its domestic textile industry is relatively small, so it exports much of the cotton it produces. In 2007, 97 percent of US net domestic consumption of cotton was from imports, even though an estimated 27 percent of those cotton goods contained US cotton.[2]

Overall, China is the largest producer and consumer of cotton, accounting for 29 percent of the world's production and 43 percent of the world's use of milled cotton in 2007. China manufactures apparel and other textile products from the milled cotton, often for export.[3] Demand in this and other emerging markets is a leading driver of cotton prices, as are seasonal growing conditions and the prices of competing crops. Higher corn and soybean prices due to the production of biofuels makes those crops more attractive to growers, displacing cotton production and driving up prices. In 2008, US cotton acres are down 30 percent, to 11 million from 15 million in 2007.[3] Demand for cottonseed, a significant byproduct of cotton production used in the food industry and for animal feed, also influences cotton prices.

The chart at left shows continuos front-month futures prices for Cotton #2 traded on the New York Board of Trade.

Prices, Tickers, and Delivery Dates

Cotton #2 is traded on the New York Board of Trade under ticker symbol CT. Futures contracts are delivered in March, May, July, October, and December of every year. (For more information on commodity tickers, check out the commodity ticker construction page.)

Higher cotton prices help producers and funds

  • Cotton farmers benefit from higher prices. However, the prices of competing crops such as corn and soybean are also very attractive and have contributed to smaller cotton production. See Factors that drive cotton prices
  • Polyester is a synthetic fiber that becomes more attractive with higher cotton prices. Polyester fiber producers include Nan Ya Plastics Corp (TPE:1303), Sarla Performance Fibers Ltd (BOM:526885), and Wellman Inc (OTC:WMANQ).

Textile manufacturers hurt by prices

  • Clothing, footwear, and industrial textile manufacturers are hurt by rising cotton prices. For example, cotton is the primary raw material for Hanesbrands, representing 6% of cost of sales, and an increase of $0.01 per pound in cotton prices translates to a $3.3 million increase in annual raw material costs.[4] However, the effect of this on company earnings is uncertain because the effect of cotton prices on industry selling prices cannot be determined.
  • In the US, 27 textile mills closed in 2007 and industry employment fell by 51,000. While higher cotton prices are not helpful, the US plant closings are mostly due to increased competition from Chinese imports.[3]

Cotton supply and demand

Error creating thumbnail

Cotton prices have spiked significantly over the last 2 years, from 59.56 cents/pound in 2006 to a peak of 81.54 cents/pound in March of 2008.[5] The International Cotton Advisory Committee forecasted a season-average Cotlook A index of 79 cents per pound for 2008/09, which represents a 6 cent increase over the 2007/08 average. The price increase is due to a slight expected decline in worldwide production from 26.2 to 25.9 million tons due to competition from soybeans and grains.[2]

Global consumption is on track to exceed production in 2008/09, which would leave the world cotton stocks down by 6% to 11.3 million tons. Imports to the rapidly developing mainland China have steadily increased and is expected to drive a 5% increase in global imports in 2008/09, while imports by the rest of the world decrease.[2]

Factors that drive cotton prices

  • Grain prices: Higher grain prices make them more attractive to cotton farmers, which leads to a decrease in cotton production. U.S. farmers planted 10.54 million acres of cotton in 2007, a 30 percent decrease from the previous year. More growers planted more corn and soybeans at the expense of cotton, especially for the production of biofuels.[3]
  • Cottonseed prices: Cottonseed is a byproduct of cotton production and is used in agriculture for animal feed and in the food industry to make cottonseed oil. Cottonseed production decreased in 2007 to 6.60 million tons, from 7.35 million the previous year, which helped to drive both cottonseed and cotton prices up.[3]
  • Climate: Growing conditions vary from year to year and is a main driver for all crops, including cotton. In particular, droughts can have a devastating effect on crops and can lead to higher abandonment and prices. Nature is an unpredictable component of agriculture and the desire to smooth this risk is one of the reasons exchange traded funds exist.
  • Synthetic fabrics: Competing fibers such as polyester puts pressure on cotton demand. Many mills are shifting toward cotton/polyester blends, which are more durable and easier to maintain than pure cotton fabric. Polyester surpassed cotton as the most used fiber in 2003.[3]

Cotton Futures Contracts

References

  1. World of Cotton.
  2. 2.0 2.1 2.2 International Cotton Prices Forecast Higher in 2008/09.
  3. 3.0 3.1 3.2 3.3 3.4 3.5 The Economic Outlook for U.S. Cotton 2008.
  4. HBI 2007 Annual Report pg. 14  
  5. 5.0 5.1 National Cotton Council of America.
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki