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SEMINAR TOPICS

A. THE COTTON MARKET

PART I

  • World Raw Cotton Trade
  • The Leading Cotton Merchants of the World
  • Functions of a Cotton Merchant

PART II

  • U.S./World Supply and Demand
  • NYBOT and Commodity Exchanges in General
    • Functions
    • Participants
    • Activity of Speculators, Index Funds and Option Traders
    • Effect of Speculators on Prices
    • Hedging of Purchases and Sales
    • What is the "Basis?"
    • 3 Types of Margins
  • NYBOT Weekly, Monthly, and Yearly Price Charts
  • Cotlook A Index and its Importance for U.S. Cotton
  • New York Futures vs. Cotlook A Index
  • Factors Influencing Cotton Prices

PART III

  • Technical Aspects of the NYBOT No. 2 Contract
    • Contract Specifications
    • Daily Trading Limit
    • The Synthetic Close for Futures
    • Open Interest in Futures and Options
    • Delivery Rules, including "Delayed Certification"
    • Certificated Stock
    • Premiums/Discounts
    • Age Penalties
    • Weight Penalties
    • Year-of-Crop Penalties

PART IV

  • Analysis of Historic Price/Crop Size Relationships
  • Price Outlook for Upland Cotton
  • Factors that Affect Cotton Prices
    • Bullish Factors
    • Bearish Factors
  • "Basis" Levels for Different Qualities/Origins
  • Competing Crops/Competing Fibers

PART V

  • The 2002 Farm Bill (FSRI Act)
  • Loan and Marketing Loan, Adjusted World Price (AWP)
  • "Windows of Opportunity" (the difference between AWP and Futures)
  • Competitiveness Formulas
    • Step-1
    • Step-3
  • Budget Restraints, Payment Limitations
  • WTO Raw Cotton Issues
  • Effects of Farm Bill on Cotton Prices
    • Current Year
    • Beyond
  • The Future of U.S. Farm Bills after 2007/08

PART VI

  • China
  • Textiles in NAFTA, Consumption Trends
  • Labor Cost Comparison
  • U.S. Textile Trade
  • U.S. Textile Consumption at Retail Level
  • Trade Issues
  • Shifts in Worldwide Buying Patterns
  • Quota-free Textile World since January 2005
  • Outlook for the Textile Industry

B. RISK MANAGEMENT AND OPTION STRATEGIES

PART I

  • "On Call" Purchases
    • Advantages
    • Risks

PART II

  • Options in General
  • Two Types of Options
  • The Differences between Buying and Selling of Options
  • The Strike Price, Exercising Options and Expiry
  • The Four Factors affecting the Price of an Option
  • Who should Buy and Who should Sell Options?

PART III

  • Cotton Options as a Risk Management Tool for Textile Mills

PART IV

  • Five Strategies Depending on a Mill's Individual Price Outlook
  • The Convenience/Advantages of having your own Brokerage Account

PART V

  • Options as "Price Insurance"

 

C. COTTON CLASSING AND COTTON CONTRACTS

PART I

  • Different Ways of specifying the Quality
    • USDA "Green Card" (USDA GC final)
    • Description
    • On type
    • Re-caps
    • Actual Samples

PART II

  • Classing
    • Traditional Method
    • USDA HVI "Green Card"
      • Who
      • Where
      • Different Quality Characteristics
        • Fiber Length
        • Uniformity
        • Strength
        • Micronaire
        • Color, including "b+" and "rd" readings
        • Leaf
        • Trash
        • Extraneous Matters and Remarks ("Reductions")
      • Characteristics not analyzed by the USDA
        • Sugar
        • Short Fiber Content
        • "Neps"
        • Maturity
      • Information available on USDA classing
        • Weekly AMS Report
        • Bale by Bale
        • Form-R
  • The Importance of a Constant Mix

D. COTTON CONTRACT

PART I

  • Different ways of Buying
    • Fixed Price vs. "on call"
    • "Forward" vs. "Spot"
  • Rights and Obligations of the Parties as per ICA Rules
  • Settlement of Disputes
    • Quality
    • Technical Aspects
  • Default Lists

PART II

  • Points to Watch when Purchasing Cotton

PART III

  • Common Problems and Solutions
  • Importance of the Cotton Controller
  • PBI (Permanent Bale Identification)

PART IV

  • What Matters Most when Buying Cotton
    • Know your Supplier and Treat him like a "Partner"
    • Make sure Seller Hedges his Risks
    • The Timing of the Purchase/Fixation
    • NYK Price Fixation is more important than the "Basis"
    • Price is not the only Factor to Decide
    • Common Sense when finding Solutions to Problems
    • Service, Information and Flexibility given by Seller
    • Integrity of both Parties
Copyright © 2004 - The Cotton School - Cotton Market and Risk Management Consulting, Inc. - All Rights Reserved.