Australian crop update | Australian Cotton conference | Highlights from China cotton conference.

Posted by Ruman on June 8, 2014

First of all I would like to remind you all about the Australian Cotton conference from 5th-7th August in Gold Coast, Australia. Please let me know if you are deciding to attend the conference.

 I wanted to give you a recent update on the quality issue based on our ginning report. Unfortunately the colour grade didn’t improve much since I wrote the last report in May.  Please note, other characteristics of the cotton this year remain the same as previous years. For example Micronaire, Strength and length is very good, however the colour grade is predominantly 31-1 and lower. Based on the ginning report available, we anticipate 20% SM and Higher, 40% Middling and 40% SLM and lower. Last  weeks rain around the southern growing regions is not helpful to the recovery of the colour grade either. 

Australian merchants have mostly stayed out of the market to purchase remaining 2014 crop from the farmers recently due to the unknown quality, report suggests merchants were offering 600pts on May’14 but now that has changed to only 300pts on July’14.

Market ‘gossips'

US weather seems to dominate the future movement at this stage. Since the news of decent rain around Texas, report indicates specs sold out more than 50000 futures contracts in a week. The recent dip also reduced the on call contracts after mills fixed their positions recently, so there will be less support from the mills going forward as they can again go into ‘ wait and see’ mode. However  Market seems to have a suppor t from the mills at this price level for fresh contracts, so if we have any bullish news, I wouldn’t be surprised to see the specs coming back into the market and the market moving towards lower .90c again.  

Excerpt from the Chinese cotton conference in Xiamen, Fujian, China  in May.

Chinese authorities tried to portray itself as the good cop, saying Chinese reserve has saved the cotton industry from crashing after 2010 record high price. Market didn’t have 'hard crash’ because they continued to purchase cotton throughout 2011-2013 at a high price. The Chinese government delegate was quoted as saying “ Cotton industry should appreciate the role Chinese reserve played in this regard”.   He finished off his speech by saying “ Chinese government will take appropriate action if necessary to look after the both Chinese farmers and textile industry”. This is a very clear indication that Chinese government has no in dication about loosening its tight control on the cotton industry and future Chinese policy will reflect this.


Chinese policy and how its affecting the market — From Mr. Anthony Tracendi (Allenberg)

Future market doesn’t reflect the spread sheet anymore, because the market is run by the fear. Based on the numbers available, it doesn’t make sense of the current high price. The fear in the market is mainly due to no clear information about Chinese government policy. So the merchants, specs and mills are too afraid to take a long term decision, because there is not enough information about the Chinese policy which can change the market situation radically.


Sincerely yours,


Agri Direct Australia Pty Ltd