ICE-Cotton No.2

Exchange Symbol CT
Chart (10 min.delay)  VIEW CHART
Exchange ICE/US  
Trading Months H,K,N,V,Z (January, March, May, July, October, December)
Contract Size 50,000 pounds (approximately 100 bales)
Tick Size 0.01 cents per pound ($5.00 per contract)
Daily Limits 3 - 7 cents ($1,500 - $3,500 per contract)
Trading Hours 8:00p.m. - 1:20p.m. CST
Last Trading Day Seventeen business days from the end of spot month
Value of One Futures Unit $500.00
Value of One Options Unit $500.00
Margin Initial/Maintenance $2,915 / $2,650 VIEW ICE MARGINS
Cotton Futures Calendar VIEW CALENDAR

+Info   Cotton is a natural vegetable fiber that comes from small trees and shrubs of a genus belonging to the mallow family, one of which is the common American Upland cotton plant. Cotton has been used in India for at least the last 5,000 years and probably much longer, and was also used by the ancient Chinese, Egyptians, and North and South Americans. Cotton was one of the earliest crops grown by European settlers in the U.S.

Cotton requires a long growing season, plenty of sunshine and water during the growing season, and then dry weather for harvesting. In the United States, the Cotton Belt stretches from northern Florida to North Carolina and westward to California. In the U.S., planting time varies from the beginning of February in Southern Texas to the beginning of June in the northern sections of the Cotton Belt. The flower bud of the plant blossoms and develops into an oval boll that splits open at maturity. At maturity, cotton is most vulnerable to damage from wind and rain. Approximately 95% of the cotton in the U.S. is now harvested mechanically with spindle-type pickers or strippers and then sent off to cotton gins for processing. There it is dried, cleaned, separated, and packed into bales.

Cotton is used in a wide range of products from clothing to home furnishings to medical products. The value of cotton is determined according to the staple, grade, and character of each bale. Staple refers to short, medium, long, or extra-long fiber length, with medium staple accounting for about 70% of all U.S. cotton. Grade refers to the color, brightness, and amount of foreign matter and is established by the U.S. Department of Agriculture. Character refers to the fiber's diameter, strength, body, maturity (ratio of mature to immature fibers), uniformity, and smoothness. Cotton is the fifth leading cash crop in the U.S. and is one of the nation's principal agricultural exports. The weight of cotton is typically measured in terms of a "bale," which is deemed to equal 480 pounds.

Cotton futures and options are traded at the Intercontinental Exchange (ICE). Cotton futures are also traded on the Bolsa de Mercadorias & Futuros (BM&F). Cotton yarn futures are traded on the Central Japan Commodity Exchange (CCOM) and the Osaka Mercantile Exchange (OME). The New York Cotton Exchange's futures contract calls for the delivery of 50,000 pounds net weight (approximately 100 bales) of No. 2 cotton with a quality rating of Strict Low Middling and a staple length of 1-and-2/32 inch. Delivery points include Texas (Galveston and Houston), New Orleans, Memphis, and Greenville/Spartanburg in South Carolina.

Prices - ICE cotton futures prices (Barchart.com symbol CT) trended higher the first half of 2017 on improvement in Chinese cotton demand. China's cotton imports slumped by -39% yr/yr to 896,600 MT in 2016, but then recovered in 2017 by +29% yr/yr to 1.155 MMT. The strong demand prompted the USDA to raise its U.S. 2016/17 export estimate to an 11-year high of 14.92 million bales and to cut its 2016/17 global cotton ending stocks estimate to a 5-year low of 87.66 million bales. The strength in demand amid tighter supplies pushed cotton up to a 3-1/2 year high of 87.18 cents per pound in May 2017. The rally though, prompted U.S. farmers to boost their cotton acreage as the USDA reported that U.S. 2017/18 cotton acreage would climb by +25% yr/yr to a 5-year high of 12.61 million acres. Cotton prices retreated into July 2017 when they posted a 1-1/4 year low of 66.49 cents per pound. Increased U.S. cotton production was negative for cotton prices as the USDA raised its U.S. 2017/18 cotton production estimate to an 11-year high of 21.26 million bales and raised its U.S. 2017/18 cotton ending stocks estimate to a 9-year high of 6.0 million bales. Concern that heavy rains from Hurricanes Irma and Harvey would damage the U.S. cotton crop gave cotton prices a boost in September and stronger Chinese demand lifted prices into year-end. Cotton prices finished 2017 up +11.3% at 78.63 cents a pound.

Supply - World cotton production in 2017/18 is forecasted to rise +12.6% yr/yr to 119.958 million bales (480 pounds per bale) but remain below the 2011-12 record high of 127.653 million bales. The world's largest cotton producers were forecasted to be India with 24.6% of world production in 2017/18, China with 20.8%, the U.S. with 17.9%, and Pakistan with 6.8%. World ending stocks in 2017/18 are forecasted to rise +0.4% yr/yr to 87.997 million bales, down from the 2014/15 record high of 111.153.

The U.S. cotton crop in 2017/18is forecasted to rise +24.9% yr/yr to 21.440 million bales, which is still below the 2005-06 record high of 23.890 million bales. U.S. farmers are forecasted to harvest 11.405 million acres of cotton in 2017/18, up +20.0% yr/yr. The U.S. cotton yield in 2017/18 is forecasted to rise by +4.0% to a new record high of 902 pounds per acre. The leading U.S. producing states of cotton in 2016 were Texas with 44.4% of U.S. production, Georgia with 10.7%, Mississippi with 6.6%, Arkansas with 4.9%, California with 4.5%, Alabama with 3.9%, and Missouri with3.4%.

Demand - World consumption of cotton in 2017/18 is forecasted to rise +4.4% yr/yr to 119.640 million bales, but to remain below the 2006-07 record high of 122.548. Consumption of cotton continues to move toward countries with low wages, where the raw cotton is utilized to produce textiles and other cotton products. U.S. production of cotton cloth has fallen sharply by almost half in the past decade due to the movement of the textile industry out of the U.S. to low-wage foreign countries. The largest consumers of cotton in 2017-8 are expected to be China with 32.6% of the world total, India with 20.7%. and Pakistan with 8.7%.

U.S. consumption of cotton by mills in 2017/18 is expected to rise +3.1% yr/yr to 3.350 million bales, which will account for 18.4% of U.S. production. The remaining 81.6% of U.S. cotton production will go for exports.

Trade - World exports of cotton in 2017/18 are expected to rise +3.3% yr/yr to 38.455 million bales, which will be below the 2005-06 record high of 44.922 million bales. U.S. cotton exports in 2015/16 fell by -19.2% yr/yr to 9.261 million bales., the lowest level since 2000. The U.S. is still the world's largest cotton exporter by far and accounts for 38.5% of world cotton exports. The main destinations for U.S. exports in 2015/16 were Mexico with 10.7% of total exports, China with 9.24%, Indonesia with 7.5%, South Korea with 5.1%, and Thailand with 4.1%. Key world cotton importers for 2017/18 are expected to be Bangladesh with 18.8% of total world imports, Vietnam with 16.9%, China with 13.8%, Turkey with 9.1%, and Indonesia with 9.0%.

Information on commodities is courtesy of the CRB Yearbook, the single most comprehensive source of commodity and futures market information available. Its sources - reports from governments, private industries, and trade and industrial associations - are authoritative, and its historical scope for commodities information is second to none. The CRB Yearbook is part of the cmdty product line. Please visit cmdty for all of your commodity data needs.

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Free Softs Brochures and Reports from ICE US

ICE offers a broad range of soft commodities futures and options for the coffee, cocoa, sugar, cotton and frozen concentrated orange juice markets providing commercial market participants with effective hedging tools to manage their price exposure and provide investors the ability to take a position on the future price movement of these often volatile commodities.

ICE is home to the global benchmarks for raw and refined sugar, Arabica and Robusta coffee, as well as US and European Cocoa prices. ICE is also the exclusive global market for the benchmark Cotton No. 2 and FCOJ futures and options.

DISCLAIMER: The above information was drawn from sources believed to be reliable. Although it is believed that the information provided is accurate, no guarantee is made. ITG Futures assumes no responsibility for any errors or omissions.

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