Selling and Marketing Cotton
Once defoliation and harvesting have been completed, ginning, marketing, and selling the produced cotton lint bales based on known quality characteristics become the primary focus of the cotton production pipeline.
AUSTRALIAN COTTON PRICE
Australian cotton is marketed in US cents/lb. However, Australian growers prefer to be paid in AUD, therefore the US price is converted to AUD currency. Three components make up the Australian cotton price – New York/International Currency Exchange (ICE) Futures, AUD/USD exchange rate/currency and basis.
There are three components that make up the cotton price and influence the daily pricing of the current and future bale prices. Futures price today, basis calculation today, spot currency, forward points and forward rate combine together to give a price. See Table 1 for an example.
Table 1: AUD gross cash price per bale equation and example of workings below.
For example, futures price today is 91.48, base calculation today is +2.83, spot currency is 0.852, forward points -0.02.
- ((ICE futures price + Basis) * 5 = US $/bale
- ((91.48 + 2.83) * 5 = US $471.55 per bale
- US $/bale divided by the forward rate = AUD $/bale
- 471.55 US $/bale / 0.832 = AUD $566.77 per bale
PREMIUM AND DISCOUNTS
Australian cotton contracts are created on ‘base grade’ which is: 31 (Middling) colour, 3 leaf, length in either 1 1/8 inches, 36 32nds or 28.7 mm, G5 micronaire (3.5 to 4.9) and above 28 g/tex with zero contamination.
Premiums and discount (P&D) sheets are compiled by all the merchants and used to allocate a premium or discount component to the original cotton price contract. The P&D sheet enables merchants to pay an additional price or premium for higher ( i.e. above) base grade quality cotton and a discount on lower ( i.e. below) base grade quality cotton. Base grade or premium quality lint is easier to market and forward sell, whereas, at times, below base grade cotton is more difficult to sell.
Depending on the discount that is incurred, discount prices will vary depending on the type of quality parameter that is below base. P&D sheets display a points system, where 100 points equals 1 US cent.
FIBRE QUALITIES OF COTTON
Fibre length is determined in the boll within the first 20-30 days post flowering. High temperatures, severe water stress and potassium deficiency can decrease fibre length. Fibre length is influenced largely by variety and moisture availability and in a minor way by weather and crop management.
Micronaire is a measure of fibre diameter and is a combination of fibre fineness and maturity. The optimum range for micronaire is 3.5 to 4.9 with discounts for lower and higher levels. Micronaire is determined during the second half of the boll fill period, when secondary filling of the fibre occurs and is heavily influenced by environmental conditions especially temperature. Ginning has little to no effect on micronaire.
Neps are defined as an entanglement of two or more fibres, creating a small knot. Neps are primarily caused by immature fibres. These immature fibres provide challenges during the dyeing process and appear as white spots. This is because the immature fibres lack cellulose and thus absorbs no or less dye than the other fibers.
Seed coat neps are also problematic for the dyeing process. Seed coat neps appear during the ginning process when the lint is removed from the seed.
Stickiness or sticky cotton can occur from persistent populations of cotton pest insect’s silverleaf whitefly (Bemisia tabaci B-biotype) or cotton aphids (Aphis gossypii). Both of these pests excrete a sticky residue or honeydew when feeding amongst cotton plants. The challenge with processing cotton affected by honeydew is the buildup of sticky residues on textile machinery, as well as gin and classing instruments.
Colour and colour grade of cotton samples can attract significant discounts when poor grades result. Cotton that appears dull, mottled, non-uniform or stained can have difficulty during the dyeing process and therefore is less desirable, incurring a discount on the P&D sheet.
Fibre quality is influenced through every step in the growing, harvesting and ginning processes of producing cotton lint.
Figure 1: Natural array of cotton lint samples. Image source: Rene van der Sluijs, TTS
Figure 2: Fibre cross section of an immature and mature cotton fibre. Image source: Rene van der Sluijs, TTS.
© Cotton Seed Distributors Ltd 2022. General guide only; not comprehensive or specific technical advice. Circumstances vary from farm to farm. To the fullest extent permitted by law, CSD expressly disclaims all liability for any loss or damage arising from reliance upon any information, statement or opinion in this document or from any errors or omissions in this document. Roundup Ready Flex®, Roundup Ready®, Bollgard II® and Bollgard® 3 are registered trademarks of Monsanto Technologies LLC, used under licence by Monsanto Australia Ltd. Insect control technology incorporated into these seeds is commercialised under a licence from Syngenta Crop Protection AG. Sicot, Sicala, Siokra and Sipima cotton varieties are a result of a joint venture research program, Cotton Breeding Australia, conducted by CSIRO and Cotton Seed Distributors Ltd (CSD). CSD is a partner in the CottonInfo joint venture, in partnership with Cotton Research Development Corporation and Cotton Australia.