Cotton Industry In A Tangle Over Price Fluctuations, Contract Defaults

CITY OF COMMERCE, CA, October 05, 2011 (Press-News.org) Cotton prices are widely unstable this year with 10 percent of all international cotton trading contracts in dispute, which is five times more than normal.

Industry body Cotton Association of India has received requests for arbitration from large multinational trading houses, exporters, and textile mills against ginners who signed contracts but did not deliver cotton when prices moved up.

"Though I can't disclose the exact number, there has been a record pile-up of arbitration cases this year and large sums are involved. High price volatility has caused these feuds," said CAI president Dhiren Sheth.

The number of disputes is so large that it could take one year for all cases to be settled. "Nothing can be done about the money that is tied up in them until then," said Bhadresh Mehta of leading export house Bhadresh Trading Corporation.

Indian textile mills and cotton exporters have now decided to stop signing future contracts with ginners that supply cotton and buy on the basis of daily prices.

The disputes arose because cotton prices rose extraordinarily fast between October and December of last year and then dropped in March of this year -- between 83 cents and $2.44 per pound.

Future sales locked the buyer and seller into an established price. When prices rose, they protected millers and traders but ginners lost out on profits and defaulted. When prices fell, ginners wanted to give delivery but mills refused to offer credit on contracts signed at higher prices.

For further comment on cotton and its availability, go to David's Textiles Web site, at http://www.DavidTextilesInc.com.

David Textiles, Inc was founded in 1985 on the philosophy of providing quality fabrics and products at competitive prices. We are a textile converter and manufacturer offering a wide range of licensed and exclusive fabrics, craft and quilt kits, No-Sew Throws, kitchen & home accessories, finished blankets, receiving & security blankets, throws and pillows. We are a leader in the design and execution of fleece prints, cottons, flannels, as well as a variety of other base cloths. Customer Satisfaction is, and always will remain, priority number one at David Textiles.