FCStone Fibers & Textiles Announces New Multi-client Study, "The Future of High Quality & Branded Cotton"

For companies thinking cotton is just cotton, the market has some surprises in store. Although the overall quality of cotton globally may be increasing, how the improvement is occurring remains surprising--long staple cotton has expanded to become the dominant type of quality cotton produced today, while at the same time these gains have translated into a decline in Pima and other extra-long staple varieties, and the traditional lower end of the market, generic upland cotton. So what had been the middle of the market has now become more important than ever in understanding the global cotton business.

Indeed, what are the ramifications of such changes? Will cotton become cheaper or more expensive? What about supply versus demand? Will there be shortages or new market opportunities?

To help answer these and other questions, FCStone Fibers & Textiles announces a new multi-client study entitled "The Future of High Quality and Branded Cotton".

With particular focus on China, India, the U.S. and Egypt, this study will examine global supply and demand trends for the major varieties of cotton, the attitudes of buyers and sellers of cotton internationally and the implications these trends and attitudes will have on merchants, mills, and retailers throughout the entire textile supply chain.

FCStone Fibers & Textiles proposes to undertake this essential strategic study for delivery to subscribing clients by August 31st. Please click here to download a copy of the study prospectus. If you have any questions regarding this study, please contact Saira Farrukh (saira.farrukh@fcstone.com) or Fred Hardin (fred.hardin@fcstone.com).

FCStone Fibers & Textiles Announces New Multi-client Study, "The Future of High Quality & Branded Cotton"

High quality and branded cotton acreage is on the decline around the world. In China, there is a major shift from extra long staple (ELS) to long staple (LS) cotton acreage underway in Xinjiang, the country's top cotton-producing province. In the U.S., Pima acreage is rapidly disappearing while Egypt is expecting a 50% reduction from last year's output. Ultimately, the rise of long staple cotton is supplanting high quality and branded grades, the ramifications of which will have a major impact on how merchants, mills, and retailers trade, purchase, consume, market, and brand high-quality cotton as a fiber and end-product.

FCStone Fibers and Textiles (formerly Globecot, Inc.) proposes to undertake a strategic study of the key countries producing long staple (LS) and extra long staple (ELS) cotton with a primary focus on China, India, the U.S. and Egypt. If you would like more information about this study, download the project prospectus. If you have any questions regarding this study, please contact Saira Farrukh (saira.farrukh@fcstone.com) or Fred Hardin (fred.hardin@fcstone.com).

Weekly Commodity Market Recap: Cotton

After drifting lower over the last five weeks, the nearby price for U.S. cotton futures plunged in the latest week, led by a limit-down move last Monday, finishing at the lowest weekly close in over two months. Prices tumbled 454 points on the week to 51.56 cents per pound, weighed down by an eroding fundamental and technical picture.
Several fundamental factors contributed to sink prices in the latest week. West Texas saw an improvement in soil moisture levels from a rain front from Mexico, with the possibility for more in the next week. The dollar rose modestly after favorable comments about its continued status as the world’s reserve currency, dampening enthusiasm for a host of commodities, including cotton. And unfixed call sales in the U.S. retreated to 41,519 contracts, the lowest in a month, helping to drag futures lower. Plus, China’s auction of reserve stocks remains lackluster, suggesting little need to open new import quotas in coming weeks, despite persistent rumors to the contrary. Finally, disappointing reports on retail apparel demand from several markets around the world last week suggested a rebound in global offtake for cotton may be delayed longer than had been expected. These nuggets of news buoyed prospects of higher supply and waning demand, dragging prices lower.
Technically, several short- and medium-term indicators point to a continued bearish picture for cotton, while longer-term indicators hint at a more robust outlook. Certainly, the week has been unusually volatile. Monday’s limit-down move came before two down days and an almost 300-point outside range reversal Thursday, before the market turned defensive again Friday. The drop in futures this week made U.S. cotton the most competitive growth in the world. Also, the weekly spec/hedge report showed speculators continue to reduce their net long position, as it is now 5.3% net long versus 9.5% last week. Not only are speculators reducing their net long position, they are shedding overall open interest, as well. Open interest fell to 112,947 contracts late in the week, the lowest in three and a half years. Whatever the reason, they are losing their appetite for long cotton.
The market likely will remain in limbo before first notice day Wednesday and subject to pre-report positioning until after the June 30 Acreage report from the USDA. There has been talk of acreage being up from the Prospective Plantings estimates in late March, which may be factoring into market weakness. But the delayed crop, combined with east Texas dryness and soggy conditions across much of the northern reaches of the Mid-South are likely to have a detrimental impact on final U.S. production.

FCStone Fibers & Textiles Announces New Multi-client Study, "The Future of High Quality & Branded Cotton"

High quality and branded cotton acreage is on the decline around the world. In China, there is a major shift from extra long staple (ELS) to long staple (LS) cotton acreage underway in Xinjiang, the country's top cotton-producing province. In the U.S., Pima acreage is rapidly disappearing while Egypt is expecting a 50% reduction from last year's output. Ultimately, the rise of long staple cotton is supplanting high quality and branded grades, the ramifications of which will have a major impact on how merchants, mills, and retailers trade, purchase, consume, market, and brand high-quality cotton as a fiber and end-product.

FCStone Fibers and Textiles (formerly Globecot, Inc.) proposes to undertake a strategic study of the key countries producing long staple (LS) and extra long staple (ELS) cotton with a primary focus on China, India, the U.S. and Egypt. If you would like more information about this study, download the project prospectus. If you have any questions regarding this study, please contact Saira Farrukh (saira.farrukh@fcstone.com) or Fred Hardin (fred.hardin@fcstone.com).

Weekly Commodity Market Recap: Cotton

Cotton futures saw little change on the week, as the market shrugged off the latest adjustments to forecasts from the USDA. As we have long argued, the USDA raised its export forecast for this year in response to another week of robust shipments, while lowering its old-crop production target a combined 800,000 bales in Brazil and India. The USDA also increased its 2008/09 estimate for Pakistani mill demand by 500,000 bales to 12.0 million. But bearish revised projections for the forthcoming marketing year offset the old-crop bulls. Particularly, anticipated Chinese mill demand and imports both fell 500,000 bales from last month’s forecasts, weighing on U.S. export prospects for next year.

For the week, Nearby cotton prices inched 99 points higher to 56.1 cents per pound, well within the 480-point band established over the last month. Reflecting the back-and-forth nature of prices recently, this latest week saw the first back-to-back daily declines in prices in a month. With little fundamental news establishing a clear bullish or bearish signal in recent days, cotton continues to take cues from outside markets. But as the declines in the dollar have begun to moderate, so too has price action in cotton, leading to this week’s dull trade.

This week promises to clear the fundamental picture a bit more, starting with the first crop condition report of the season. Analysts are watching the prospects for higher abandonment in Texas owing to drought, particularly along the Coastal Bend. Further downstream, retail sales data in several markets across Europe and Latin America may give a clearer look at when global consumer demand for apparel may begin to rebound, setting the stage for improved mill offtake. Also, last week U.S. cotton became quite competitive relative to several foreign growths. This is likely to spur increased sales in the next export report due Thursday. News developments on the dollar, the weather, and on the outlook for retail demand are likely to be key drivers for cotton prices in the near term.

Weekly Commodity Market Recap: Cotton

The market is set to digest a slew of data this week that could help set the direction and pace for what has become a listless cotton market. Industrial production and retail trade reports from several key markets around the world may shed insight into the likelihood of improved demand for textiles and apparel around the globe.
In one of the most anticipated releases this week, new WASDE data Wednesday may set the tone for a gradual improvement in fundamentals, or could keep the cotton market mired in burdensome oversupply. We look for the report to boost the old-crop U.S. export forecast by a few hundred thousand bales, reducing carryover stocks and tightening the domestic stocks-to-use ratio. Looking to the new marketing year, we don’t expect much change in U.S. production, as an abundance of moisture in the Southeast and Mid-South may offset dry conditions in South Texas and California’s San Joaquin Valley.
On the demand side, we believe at 3.5 million bales, the U.S. mill demand forecast is optimistic. Consumption has recently averaged closer to 3.1 million bales, and we see little reason to expect a 10-15% improvement in 2009/10. We look for a rebound in the global economy in 2009/10 to drive a jump in global cotton mill demand and a global trade. Accordingly, as the world's largest exporter, we expect an increase in global cotton trade to prompt an increase in U.S. cotton exports in response. This increase from the USDA is likely to come gradually over the next several months, but we look for the higher revisions to start soon. Little anticipated change in supply from the May WASDE report, coupled with a net increase in demand is likely to reduce U.S. ending stocks to the lowest level in six years.
Cotton prices eased again last week, down three of the last four weeks, after breaking from their March-to-May surge. Nearby prices dipped 186 points, finishing the week at 57.11 cents per pound. Futures prices declined on the week as strength in the dollar continued to have a strong influence on cotton. Just as cotton is mostly higher since March, the dollar is mostly lower over the period. But last week saw a sizable rebound in the dollar, boosted by positive data in Friday’s unemployment report. With few unanticipated changes in the fundamentals yet to materialize from the forthcoming cotton marketing year, we look for cotton to take more direction from the influences of outside markets. We remain mildly bullish longer term, but expect choppy conditions to persist into the summer.

Outlook: The Future of the Global Cotton & Polyester Markets

The past 18 months have challenged the global cotton trade as never before. After surviving a virtual collapse in aggregate textile demand not seen since the Great Depression, global over-capacity has become a serious problem for the long-term viability of the fiber and textile trade. Further, dramatic changes in the international textile industry have resulted in new consumption trends. This has led to serious problems for merchants, co-ops, producers and consumers of cotton. At the same time, cotton has lost market share to polyester on a global basis. As if these problems were not bad enough, provisions of the Farm Bill are having unforeseen effects on the market – effects that will have long-term implications.

As a result, we are undertaking an extensive multi-client study of the global supply and demand situation for polyester fiber and cotton. The study will be completed in June.
Recognizing that basic market statistics are widely available, FCStone Fibers & Textiles, is building upon these data to establish a realistic forecast for future textile fiber consumption and production. Because of our unique perspective of the cotton and textile businesses, we are leveraging our unique insight into the market with supporting quantitative and qualitative information. The ensuing study will be designed to provide a competitive advantage to sponsor companies.

Click here to download a copy of our project prospectus.
Questions? Click here to contact us now to discuss, or call us at 615-234-2757

Weekly Commodity Market Recap: Cotton

Even though the trading week was shortened by holidays in the U.S. and China, cotton saw a jump in volatility, with prices swooning almost limit-down during intra-day trade Tuesday, only to bounce limit-up during early trading Friday. On balance, the two days mostly offset one another, with prices easing 14 points from last week to 56.97 cents per pound. Sunny, drier weather across much of the U.S. cotton belt enabled producers to rapidly advance plantings last week, but the season-to-date national pace still remains well behind trend, hinting at the increased potential for yield and quality issues later this autumn. At 61%, the share of crop already planted to cotton jumped 19 percentage points from last week, but is still down 8 points from the five-year average. Arguing further for the bulls, U.S. exports in the latest week remained above the pace necessary to reach the latest USDA forecast, reinforcing our belief that this forecast is too low. At 296,000 bales, shipments again easily outpaced the 207,000-bale pace necessary to reach the 12.5 million-bale target from the government. We look for exports in 2008/09 to exceed 13.0 million, putting tighter pressure in coming weeks on the domestic stocks-to-use ratio. Further cementing the bulls’ argument, the U.S. Dollar Index breached its December 2008 low, breaking technical support levels and driving a host of commodity prices higher.
The bears point to the acceleration in the auctions of reserve stocks in China, weak U.S. mill demand, and scattered showers across much of Texas to temper price gains. China said last month it will sell just over 1.5 million tons of cotton from its state reserves in a bid to ease tight supplies. Since May 22, Chinese textile mills in China have bought 65% of the 58,442 tons released for sale so far. While a far cry from the total reserve levels, volume jumped in the latest day of trading after the government eased the procurement price as discussed here. Also last week, the U.S. Census Bureau announced that annualized April mill use fell to less than 3.1 million bales, the lowest April ever recorded. This is less than the 3.6 million currently anticipated by the USDA for 2008/09, and may drive the projection lower in coming months. Finally, wet weather returned to much of Texas in recent days, benefiting the young crop. While Rio Grande cotton remains under exceptional drought conditions, the welcome rains alleviated dryness across much of the Rolling Plains and West Texas, hinting at improved yield prospects in the largest cotton-producing state.