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116.50   (-2.05)   15:03 GMT 2nd Dec, 2021

86,58   December 2022

Mill-delivered prices and prices received by farmers can vary substantially by quoted international values. Most of the South African cotton is sold by utilising marketing pools as it is popular because it offers substantial economies of scale in marketing. In this arrangement, each ginner pools the producer’s cotton into larger lots and manage the marketing of the pool’s cotton. The ginner uses the size of the marketing pool to negotiate higher premiums for cotton than when individual producers would have marketed the cotton themselves. Farmers are normally offered a below-market, up-front cash distribution based on the amount of cotton placed in the pool. Then as the cotton is sold to merchants or textile mills, the net proceeds of the sales are distributed back to the farmers. In all cases, prices for individual lots of cotton will reflect discounts or premiums for quality different from the base quality quoted in the international markets. The main advantage of the marketing pool is that it offers a form of price risk management since each producer will receive the average price achieved by the entire pool, adjusted for the quality delivered, and does not have to worry that his or her particular cotton was sold when the market price was lowest.
Read more about this week’s average price.

Cotlook Indices

The Cotlook Indices are widely regarded barometers of international price movement for upland cottons used to spin medium and coarse count yarns. These constitute the broadest-based and most consistent of price data across countries that currently exists. These prices are compiled and published each day by Cotlook Ltd of Liverpool, an independent private company whose staff have no trading interest in cotton.

Cotlook Ltd gathers and collates information from around the world about the prices at which cotton from various origins is offered to spinning mills and establishes its assessment of the representative price (including cost, insurance, and freight to Far Eastern ports) for each growth. The Cotlook A Index is a Middling 1-1/8-inch staple quality, and cotton from 18 countries or growing areas of the world are eligible constituents. The day’s index is the simple average of the cheapest five quotations from a selection (at present, numbering eighteen) of the principal upland cotton traded internationally. The rationale behind using the cheapest values in the average is that these options could be expected to be more heavily traded and could therefore be more reflective of the transactions in the global market.

The A Index tends to be higher than the New York Futures for two reasons, namely:

  • The quality of the cotton represented by the A Index is higher than the quality represented by the New York Futures; and
  • The A Index prices include shipping costs to the Far East.

FOR MORE INFORMATION ON THE CURRENT COTLOOK INDICES

New York Futures prices are for a standardised quality (a futures contract in New York is for 50 000 pounds of Strict Low Middling cotton, 1-1/16-inch staple, 3.5 – 4.9 micronaire). They represent the market consensus of expected future prices for that quality at the designated future times and places specified in the contracts. It is important to note that they reflect the consensus on future, not current, prices. However, there tends to be a positive but not perfect correlation between future expectations and current cash prices.

Most cotton traded on the futures exchange never changes hands (contracts are rarely delivered against). This is because positions are liquidated before contract maturity. The futures market is more often treated as a means of price discovery than a direct market pricing arrangement. It is instead used for price risk management to ensure against the effects of adverse price movements over time.

New York Futures prices are more a direct reflection of prices in the USA than in other countries. They are also used in other countries because their movements are highly correlated with international prices. There are futures exchanges for cotton in some other countries (e.g., Turkey), but none are as widely used as the New York Exchange.

Mill-delivered prices and prices received by farmers can vary substantially by quoted international values. Most of the South African cotton is sold by utilising marketing pools as it is popular because it offers substantial economies of scale in marketing. In this arrangement, each ginner pools the producer’s cotton into larger lots and manage the marketing of the pool’s cotton. The ginner uses the size of the marketing pool to negotiate higher premiums for cotton than when individual producers would have marketed the cotton themselves. Farmers are normally offered a below-market, up-front cash distribution based on the amount of cotton placed in the pool. Then as the cotton is sold to merchants or textile mills, the net proceeds of the sales are distributed back to the farmers. In all cases, prices for individual lots of cotton will reflect discounts or premiums for quality different from the base quality quoted in the international markets. The main advantage of the marketing pool is that it offers a form of price risk management since each producer will receive the average price achieved by the entire pool, adjusted for the quality delivered, and does not have to worry that his or her particular cotton was sold when the market price was lowest.
Read more about this week’s average price.

COTLOOK INDICES

Cotlook Indices

The Cotlook Indices are widely regarded barometers of international price movement for upland cottons used to spin medium and coarse count yarns. These constitute the broadest-based and most consistent of price data across countries that currently exists. These prices are compiled and published each day by Cotlook Ltd of Liverpool, an independent private company whose staff have no trading interest in cotton.

Cotlook Ltd gathers and collates information from around the world about the prices at which cotton from various origins is offered to spinning mills and establishes its assessment of the representative price (including cost, insurance, and freight to Far Eastern ports) for each growth. The Cotlook A Index is a Middling 1-1/8-inch staple quality, and cotton from 18 countries or growing areas of the world are eligible constituents. The day’s index is the simple average of the cheapest five quotations from a selection (at present, numbering eighteen) of the principal upland cotton traded internationally. The rationale behind using the cheapest values in the average is that these options could be expected to be more heavily traded and could therefore be more reflective of the transactions in the global market.

The A Index tends to be higher than the New York Futures for two reasons, namely:

  • The quality of the cotton represented by the A Index is higher than the quality represented by the New York Futures; and
  • The A Index prices include shipping costs to the Far East.

FOR MORE INFORMATION ON THE CURRENT COTLOOK INDICES

Click here to view current cotlook indices

NEW YORK FUTURE EXCHANGE (NYFE)

New York Futures prices are for a standardised quality (a futures contract in New York is for 50 000 pounds of Strict Low Middling cotton, 1-1/16-inch staple, 3.5 – 4.9 micronaire). They represent the market consensus of expected future prices for that quality at the designated future times and places specified in the contracts. It is important to note that they reflect the consensus on future, not current, prices. However, there tends to be a positive but not perfect correlation between future expectations and current cash prices.

Most cotton traded on the futures exchange never changes hands (contracts are rarely delivered against). This is because positions are liquidated before contract maturity. The futures market is more often treated as a means of price discovery than a direct market pricing arrangement. It is instead used for price risk management to ensure against the effects of adverse price movements over time.

New York Futures prices are more a direct reflection of prices in the USA than in other countries. They are also used in other countries because their movements are highly correlated with international prices. There are futures exchanges for cotton in some other countries (e.g., Turkey), but none are as widely used as the New York Exchange.

FOR MORE INFORMATION ON THE CURRENT NYFE PREDICTIONS

CURRENCY CALCULATOR
COTTON PRICING ARRANGEMENT

Mill-delivered prices and prices received by farmers can vary substantially by quoted international values. Most of the South African cotton is sold by utilising marketing pools as it is popular because it offers substantial economies of scale in marketing. In this arrangement, each ginner pools the producer’s cotton into larger lots and manage the marketing of the pool’s cotton. The ginner uses the size of the marketing pool to negotiate higher premiums for cotton than when individual producers would have marketed the cotton themselves. Farmers are normally offered a below-market, up-front cash distribution based on the amount of cotton placed in the pool. Then as the cotton is sold to merchants or textile mills, the net proceeds of the sales are distributed back to the farmers. In all cases, prices for individual lots of cotton will reflect discounts or premiums for quality different from the base quality quoted in the international markets. The main advantage of the marketing pool is that it offers a form of price risk management since each producer will receive the average price achieved by the entire pool, adjusted for the quality delivered, and does not have to worry that his or her particular cotton was sold when the market price was at its lowest.
Read more about this week’s average price.

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Cotlook Indices

The Cotlook Indices are widely regarded barometers of international price movement for upland cottons used to spin medium and coarse count yarns. These constitute the broadest-based and most consistent of price data across countries that currently exists. These prices are compiled and published each day by Cotlook Ltd of Liverpool, an independent private company whose staff have no trading interest in cotton.

Cotlook Ltd gathers and collates information from around the world about the prices at which cotton from various origins is offered to spinning mills and establishes its assessment of the representative price (including cost, insurance, and freight to Far Eastern ports) for each growth. The Cotlook A Index is a Middling 1-1/8-inch staple quality, and cotton from 18 countries or growing areas of the world are eligible constituents. The day’s index is the simple average of the cheapest five quotations from a selection (at present, numbering eighteen) of the principal upland cotton traded internationally. The rationale behind using the cheapest values in the average is that these options could be expected to be more heavily traded and could therefore be more reflective of the transactions in the global market.

The A Index tends to be higher than the New York Futures for two reasons, namely:

  • The quality of the cotton represented by the A Index is higher than the quality represented by the New York Futures; and
  • The A Index prices include shipping costs to the Far East.

FOR MORE INFORMATION ON THE CURRENT COTLOOK INDICES

Cotlook Futures

New York Futures prices are for a standardised quality (a futures contract in New York is for 50 000 pounds of Strict Low Middling cotton, 1-1/16-inch staple, 3.5 – 4.9 micronaire). They represent the market consensus of expected future prices for that quality at the designated future times and places specified in the contracts. It is important to note that they reflect the consensus on future, not current, prices. However, there tends to be a positive but not perfect correlation between future expectations and current cash prices.

Most cotton traded on the futures exchange never changes hands (contracts are rarely delivered against). This is because positions are liquidated before contract maturity. The futures market is more often treated as a means of price discovery than a direct market pricing arrangement. It is instead used for price risk management to ensure against the effects of adverse price movements over time.

New York Futures prices are more a direct reflection of prices in the USA than in other countries. They are also used in other countries because their movements are highly correlated with international prices. There are futures exchanges for cotton in some other countries (e.g., Turkey), but none are as widely used as the New York Exchange.

FOR MORE INFORMATION ON THE CURRENT NYFE PREDICTIONS