Cotton Warehouse Row Long To Repeat The Mistakes Of Aluminum Market

　　 cotton (15740, -10.00, -0.06%) traders will have to wait from the US warehouse for several months. This is aggravating the supply shortage. It is worrying that the cotton market is being restrained by the storage link and replaying the warehouse game which has led to the deep crisis in the aluminum trading market.

It is reported that cotton stocks have dropped to the lowest seasonal level in more than seven years, and cotton prices have soared. So this year, traders with warehousing and warehousing have been stockpaging, ready to make a profit by raising the price. But 12 traders, buyers and warehouse operators say that some warehouse operators are doing everything possible to delay the outgoing rate so that they can continue to charge for warehousing.

Over the years, this problem has been bothering the market intermittently, and this year it has intensified. This is the problem from the warehouse in lubok, Dezhou to Memphis, Tennessee. Although there has been no general report on the delay in warehousing, traders say the current problem is that the current minimum shipment speed requirement is the most serious since the beginning of 2004.

"Because cotton takes months to reach buyers, American cotton growers and growers are missing opportunities to sell," said Kevin McDermott, vice president of Jess Smith & Sons Cotton, a medium-sized cotton trader in Becker, California, USA.

Olam International, the world's second largest cotton trader, and other traders are calling for measures to force warehouse operators to release cotton as soon as possible.

But those who own warehouses, including independent warehouse operators, cotton farmers cooperatives and traders, say that their shipments are fully in line with government regulations.

But the Cotton Growers Warehouse Association also acknowledges that there is a possibility of gaining more revenue by delaying shipments. The association represents warehousing operations affiliated to cotton farmers cooperatives.

This is because the outgoing rate only provides the minimum requirements for cotton outgoing. As long as the warehouse follows this minimum requirement, no violation is required.

"We are looking for ways to reward the warehouses that provide good services through institutional or market access to combat warehousing of cotton for profit," said Andrew Jordan, executive director of the association.

In the face of industry pressure, the US Department of agriculture (USDA) is preparing to strengthen its supervision next month. USDA supervises more than 300 warehouses throughout the country.

It is not clear how much cotton is stuck in the waiting queue, and the market sources who Reuters interviewed do not want to specify which stores are waiting the longest. Storage capacity varies from warehouse to warehouse, ranging from 1000-500000 packages.

Digital buyers say Luis Anna S has been a hot spot this year, which is very close to some of the major cotton mills and transportation hubs in the United States.

Because manufacturers are purchasing with just-in-time, cotton stocks are very low and prices fluctuate. Traders fear that if their cotton cards are queued up, they will be caught off guard because of shortages and eventually have to pay high prices to get supplies from other sources.

Louis Dreyfus Commodities, the world's largest cotton trader, is also the largest trade and storage operator in the United States, which has at least 18 warehouses in eight states. As for other traders, Ecom Agroindustrial has at least six warehouses, and Cargill and Olam each have three warehouses. There are at least three Noble Group. None of the companies commented on the interview with Reuters.

The queuing phenomenon of cotton is similar to that of metal aluminum storage. Sometimes, aluminum buyers need to wait for two years to pick up the goods. The US Department of justice and Commodity Futures Trading Commission (CFTC) are investigating the aluminum market.

Aluminum market declassified

It has been reported that the LME warehouse limits the daily delivery volume, which makes the owner of the warehouse a huge profit, because the end users have to pay rent for the waiting period of up to a year or even longer.

The long waiting time also leads to the fact that the actual price is out of line with the LME contract price. In some extreme cases of the aluminum price (13415, -55.00, -0.41%) market, the actual price is higher than the LME benchmark contract price by 10-15%.

The new LME proposal will force those warehouses with more than 100 days' pick-up cycle, and at least 1500 tons of shipments per day, which includes Glencore's Pacorini, Goldman Sachs Metro and Nems's warehouse.

　 Cotton market The congestion level is not as urgent as the aluminum market, but the problems are much the same.

Warehouse operators offer incentives such as rent discounts to absorb cotton and aluminum. In the economic downturn, these transactions are profitable for businessmen with surplus raw materials.

But when export demand rose at the end of 2013 and traders rushed to pick up the goods at the time of rising prices, they found that it was not easy to deliver goods from the warehouse.

Shane Stephens, vice president of Staplcotn storage, said that customers want to extract cotton from warehouse more quickly, so they have to pay for higher costs.

The warehouse also wants to protect their revenue sources, especially when supplies are falling. American farmers have less harvest this season, and the competition of cotton producers has further consumed their inventory.

According to the US Department of agriculture, inventory fell below 4 million packages in the first week of May, the lowest level in the same period since 2007.

One of the reasons for such inventory is the US Department of agriculture's minimum loadout rule, which is similar to the rules used by the London Metal Exchange (LME) to ensure metal flow.

In recent years, LME has raised the minimum shipment rate requirement to alleviate queuing up phenomenon, and is now trying to enforce more stringent regulations.

As far as cotton is concerned, the amount of transport that the operator must transport or prepare to transport in any order week must not be less than 4.5% of the inventory or capacity. Some warehouses are certified and monitored by the Intercontinental Exchange. The cotton futures contract of the exchange's operation requires cotton to be shipped within nine weeks after being requested.

When demand is high and supply is low, such a frequency is too long to meet the immediate demand of the factory that maintains minimum inventory for a long time.

　　 The United States is about to adopt new measures.

The sharp fluctuations in cotton prices in 2011 led to a shutdown of a long established us trader and triggered accusations of market manipulation. Now this problem is emerging again at the critical moment of cotton industry.

According to the May 7th announcement of the American Cotton Association (NCC), according to the working group composed of traders, farmers and warehouse operators, the US Department of agriculture will implement a new system to measure delivery speed next month.

The new data will show how many packages of cotton required by merchants to ship, but this measure is not mandatory.

The USDA declined to comment on the new system, nor did it comment on complaints about the slow pace of cotton deliveries delivered by warehousing companies.

Although many market participants say the US Department of agriculture has taken a good first step, Ashok Hegde, director of global cotton department at Oran international, said that it was not enough.

"It's hard to see what will happen if we change industry standards to increase delivery speed, or commercial competition pressures will help warehouse service providers provide better services," he said.

Although queuing is distressed by cotton producers, it seems unlikely that it will cause widespread concern. Coca-Cola and MillerCoors LLC and other cans manufacturers have aroused congressional hearings and lawsuits due to queuing up in the aluminum market, claiming that they are queuing up to push up spot prices.

This is unlikely to happen in the cotton market. Recent months Cotton price (Prompt-month price), though higher than the futures price, is not near the record high. Major cotton users remain low-key before the next season's new supply, and hope that pressure on the US Department of agriculture will enhance transparency.