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Cotton #2 Mar '24 (CTH24)
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Contract Specifications for [[ item.sessionDateDisplayLong ]]
Barchart Symbol CT
Exchange Symbol CT
Contract Cotton #2
Exchange ICE/US
Tick Size 0.01 cents per pound ($5.00 per contract)
Margin/Maintenance $3,300/3,000
Daily Limit 3 - 7 cents ($1,500 - $3,500 per contract)
Contract Size 50,000 pounds (approximately 100 bales)
Months Mar, May, Jul, Oct, Dec (H, K, N, V, Z)
Trading Hours 8:00p.m. - 1:20p.m. (Settles 1:15p.m.) CST
Value of One Futures Unit $500
Value of One Options Unit $500
Last Trading Day Seventeen business days from end of spot month

Description

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 by 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 equals 480 pounds.

Cotton futures and options are traded at the ICE Futures U.S exchange. Cotton futures are also traded on the B3 exchange. Cotton futures are traded on the Multi Commodity Exchange of India and the Zhengzhou Commodity Exchange. The ICE Futures U.S. 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 to begin 2022 and rallied into Q2 when they posted an 11-year high of 158.02 cents per pound in May 2022. The worst drought since 2011 in West Texas, the largest U.S. cotton-producing region, sparked cotton supply concerns in the U.S., which is the world's largest cotton exporter. Also, robust cotton demand from China, the world's biggest cotton importer, added fuel to the rally in cotton as the Chinese economy began to reopen from the pandemic. However, cotton prices fell sharply into July as the dollar index surged to a 20-year high, which curbed demand for U.S. cotton supplies. Also, surging inflation fueled commodity demand concerns after the U.S. June CPI jumped to a 41-year high. In addition, the USDA, in July's WASDE report, said, "global cotton consumption prospects have declined as negative macroeconomic forces dampen consumer demand." Due to flagging demand from high prices, Cotlook in July raised its 2022/23 global cotton ending stocks estimate to 1.11 MMT from a May estimate of 467,000 MT. Cotton prices in August then recovered about half of the May/July decline after the USDA, in its August WASDE report, cut its U.S. 2022/23 cotton crop estimate more than expected to 12.57 million bales, the smallest crop since 2009/10. The drought in Texas curbed its cotton production in 2022 to 2.9 million bales, down -62% yr/yr. Cotton prices then reversed and sold off into year-end, posting a 2-year low of 70.21 cents per pound in October. A resurgence of Covid in China prompted the government to implement its Covid-Zero policies that curbed economic activity. That reduced China's demand for cotton as Chinese cotton import from Jan-Sep dropped -21.2% y/y to 1.46 MMT. Cotton prices finished 2022 down -26% yr/yr at 83.37 cents a pound.

Supply - World cotton production in 2022/23 is forecasted to decrease by -0.3% yr/yr to 115.396 million bales (480 pounds per bale) and remain below the 2011/12 record high of 127.244 million bales. The world's largest cotton producers are forecasted to be China with 24.3% of world production in 2022/23, India with 23.0%, the U.S. with 12.7%, Brazil with 11.5%, and Australia with 4.3%. World ending stocks in 2022/23 are forecasted to rise by +5.4% yr/yr to 89.933 million bales, down from the 2014/15 record high of 108.002.

The U.S. cotton crop in 2022/23 is forecasted to decrease by -18.7% yr/yr to 14.242 million bales and remain below the 2005/06 record high of 23.890 million bales. U.S. farmers are forecasted to harvest 7.876 million acres of cotton in 2022/23, down by -23.3% yr/yr. The U.S. cotton yield in 2022/23 is forecasted to rise by +6.0% yr/yr to 868 pounds per acre, but still down from the 2017/18 record high of 905 pounds per acre. The leading U.S. producing states for cotton in 2022 were Texas with 23.5% of U.S. production, Georgia with 17.6%, Arkansas with 10.9%, Mississippi with 7.9%, North Carolina with 6.7%, Alabama with 5.7%, and Missouri with 5.2%.

Demand - World cotton consumption in 2022/23 is forecasted to fall by -5.4% yr/yr to 110.773 million bales. The largest consumers of cotton in 2022/23 are expected to be China with 32.0% of the world total, India with 20.3%, and Pakistan with 8.1%. U.S. consumption of cotton by mills in 2022/23 is expected to fall by -3.1% yr/yr to 2.235 million bales.

Trade - World exports of cotton in 2022/23 are expected to fall by -2.8% yr/yr to 41.656 million bales, falling back from the record high of 48.726 million bales in 2020/21. Major world cotton importers for 2022/23 are expected to be Bangladesh with 19.2% of total world imports, China with 18.6%, Vietnam with 15.4%, Pakistan with 12.0%, and Turkey with 10.3%.

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 Barchart product line. Please visit us for all of your commodity data needs.

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