A task force of cotton merchants has agreed the basis of a global futures contract, one of its members said on Thursday. This specification would likely form the basis for IntercontinentalExchange Inc's plans for the world's first international contract with physical delivery.
Earlier this month, the Atlanta-based exchange told Reuters it planned to list a global contract, which would run in parallel with its US only contract, early next year, but it was still working out the specifications. Antonio Esteve, CEO of Ecom Cotton Group, said final tweaks had been made on Thursday to the "skeleton" contract at a meeting in north-west England of a joint task force set up by the International Cotton Association and American Cotton Shippers Association.
Esteve, a former president of the ICA, said the contract would be based on cotton produced in either the United States, Brazil, Australia, India or West Africa, in total amounting to around half world production. The cotton could be delivered in either the US, Australia or Malaysia, he said on the sidelines of a conference organised by the ICA.
"It could be a useful tool for the whole international community," he said, noting the leading cotton futures contract, traded on ICE, was based on only about 10 percent of output. The West African cotton could be from either the Ivory Coast, Mali, Burkina Faso, Benin or Cameroon, he said. Esteve said the task force had wanted a delivery point in Asia, the most important consuming region, and chose Malaysia because of its port infrastructure, political stability and the fact it is already an important trans-shipment point.
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