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  • 1.4.5-THE WORLD COTTON MARKET-THE DUAL SYSTEM

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  • The dual system

    Chapter 1 - The world cotton market - The Cotlook Indices 

     
     

    In arithmetical terms, the manner in the indices are calculated has remained unaltered since their introduction: each is a simple average of the cheapest growths (five in the case of the A Index and A (NE) Index, three in the case of the B Index) in its respective selection.
     


    However, since 1988, Cotlook has operated a dual index system. Under this system, two sets of indices (one reflecting quotations of the current season, the other forward quotations, for the next season) run concurrently from the establishment of the forward indices until the end of the marketing season in question on the last business day of July. At that time, the existing current indices disappear, and the forward indices are transformed into the new current indices. Those indices alone will be published until early the following year.

    As soon after the turn of the year as is practicable, a forward value is established for each growth, for shipment no earlier than October/November of the coming cotton season. In deciding when to introduce each forward quotation, Cotlook is influenced only by the market evidence available, and the degree of confidence that can therefore be placed on its validity. When sufficient forward values have been introduced, they are consolidated into the A, A (NE) and B (NE) Indices. No specific date is set for this step. Forward indices are usually introduced in March, but occasionally as early as February and, in the case of the B Index, as late as July. October/November (rather than August/September) is chosen as the initial shipment period, since it is during these months that the Northern Belt crops begin to move in volume. Southern Belt new crop values are ignored for index calculation purposes before 1 January, whether they appear on Cotlook’s price lists or not (see figure 1.34). 

     

    1.4.5-en
     Source: Cotlook