Cotton prices soar, African cotton jump sharpest

Cotton prices were pushed higher on 11 January by a record number of unfixed sales of cotton squeezing cotton mills who are stuck paying higher prices for cotton than anticipated. Approximately 5 million bales of cotton were yet not fixed against futures in the March contract, a record for this time of year. Mills who were largely bearish waited to fix sales, expecting prices to go lower because of a bearish global picture last summer from USDA.

Cotton prices for March rose 3.8% to end at US cents 82.65 per pound, the highest level since 15 May 2017, a day which saw massive short squeeze push cotton prices to limit-up levels for the exact same reason.

Cotton prices have jumped 20% since July, and mills are running out of time for them to come back down. Between the March, May and July contracts, 11.6 million bales have yet to be fixed.

Meanwhile, global spot benchmark the “Cotlook A” index gained US cents 1.30 to US cents 90.35 a pound. On the month, Cotlook recorded  sharp jump of US cents 6.90 a pound or 8.3%.

Among the various origins, African cotton prices was seen gaining the most after US. During the day, all the five short staple fibre originating from Africa (see chart) were up US cents 1.45 per pound to reach US cents 93.50 per pound. They were also 12% higher than a year ago, the sharpest rise among major origins.

(What is unfixed sales – Quantity of call cotton bought or sold on which the price has not been fixed, together with the respective futures on which the purchase or sale is based. Call cotton refers to physical cotton bought or sold, or contracted for purchase or sale at a price to be fixed later based upon a specified delivery month future’s price)