The IntercontinentalExchange plans to launch a new global cotton contract to run in conjunction with the existing benchmark No 2 contract, ICE Futures US President and Chief Operating Officer Ben Jackson said on Monday. The exchange has "engaged in in-depth conversations around a new international cotton contract," Jackson said at a cotton conference in New York held by ICE and the China National Cotton Reserves Corp.
Jackson said the existing No 2 cotton contract will remain the benchmark and that the new contract will be an alternative. There is no set timetable for the global contract, though the exchange is "pretty close" to finalising the specifications for it amid discussions with a committee of customers and the American Cotton Shippers Association, Jackson told Reuters.
Cotton traders have said that a new contract is necessary to better reflect the global market and avoid price distortions, as the existing benchmark allows for deliveries of only US cotton. Discussions have slowed amid debate over specifications for a world contract, including what other origins would be deliverable against it and whether the contract would be an origin or a destination contract. Jackson cited the growing role of China in the international fiber market in the move.
Working with global customers "gives us an interesting perspective on the impact that China has on the international cotton market, the international textile industry," Jackson said. "It is impossible to overstate that role." China National Cotton Reserves Corp General Counsel Liu Hua told the conference that the state-owned reserve would consider participating in a futures contract and making deliveries through one.
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