USPs of NCDEX platform

Transcription

1 29 mm Cotton

2 USPs of NCDEX platform Supervised pressing of bales Stricter norms for unsupervised production Gujarat Delivery centers only in Gujarat Display of quality parameters of every lot deposited with exchange No quantity shortage to be faced by a buyer Smoother remat sampling process during outbound deliveries 29 mmcotton V797 Kapas Shankar Kapas Cotton Seed (Contract design under process) Cotton Seed Oil Cake Complete bouquet of Cotton complex available at one platform 02

3 29 mm Cotton Cotton refers to the ginned brous substance extracted from the cotton plant (cotton boll), which covers the underlying seed. 29 mm refers to the staple length, which is considered to be a ne grade long staple variety of cotton, with a micronaire of Cotton as a crop is known to the world for at least 7000 years and enjoys a prime place among all agricultural commodities for multiplicity of its uses as a ber, protein and oil. Cotton is one of the most important textile bers in the world, accounting for around 35 percent of total world ber use. While some 80 countries from around the globe produce Cotton, the United States, China, and India together provide two-thirds of the world's Cotton. India, the leading producer of Cotton for last 2 years, followed by China and USA, has the largest area under cotton cultivation, accounting for over one-third of global area under raw cotton. Cotton is the most important raw material for the textile industry as a whole. The Indian textiles industry, currently estimated at around US$ 108 billion, is expected to reach US$ 223 billion by The industry is the second largest employer after agriculture, providing employment to over 45 million people directly and 60 million people indirectly. The Indian Textile Industry contributes approximately 5 per cent to India's Gross Domestic Product (GDP), and 14 per cent to overall Index of Industrial Production (IIP). Value Chain Cotton Seed Oil Cake Cotton Bales Cotton Lint Cotton Bolls Cotton Seed Cotton Oil Textile Industry 03

4 Geographical spread Raw Cotton is majorly grown in Gujarat followed by Maharashtra, Telangana, Andhra Pradesh, Karnataka, Haryana, Madhya Pradesh and Punjab. It is a four month long crop with a two month sowing window, around June-July. Thus the arrival of the crop typically starts in October. The seed extracted from raw Cotton is crushed to extract oil and the by product, cotton seed oil cake, which is left after crushing is generally used as cattle feed. Typically raw cotton contains 35% Fiber and 63.5% seed by weight. Crop Cycle Global China US India Pakistan Brazil Center Brazil North East Uzbekistan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sowing Growth Stage Harvesting Domestic Gujarat Maharashtra Telangana & A.P. Punjab Haryana May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Sowing Growth Stage Harvesting 04

5 NCDEX 29 mm cotton futures Given that cotton has considerable price volatility and the export demand, NCDEX traded cotton futures are ideal for price risk management need of the ginners, spinners, exporters, brokers & agents. Speculators can take directional view on future prices and accordingly take positions in 29 mm Cotton futures. Factors inuencing 29 mm cotton prices Production and pricing gures of long staple cotton Direct procurement by the government agencies and storage in warehouses Export and domestic demand of cotton has a direct correlation with prices of cotton irrespective of the variety Prices of other bers/ substitutes Monsoon plays most crucial factor in the production of cotton 05

6 Contract specications Parameter Ticker Symbol Unit of Trading Delivery Unit Maximum Order Size Quotation/Base value Specications COTTON 25 Bales (of 170 Kgs each) 100 Bales (of 170 Kgs approx.) 50 Trading Lots i.e Bales Rs. per Bale Tick Size Rs. 10 Quantity Variation Delivery Center Additional Delivery Centers Delivery Logic Delivery Specication Due date/ Expiry Date Final Settlement Price +/- 9% for total weight of each deliverable lot Rajkot, within a radius of 100 Kms from the municipal limits Kadi (Gujarat) within a radius of 100 Kms from the municipal limits at a premium/ discount as announced by the Exchange from time to time. Compulsory Delivery Upon expiry of the contracts all the outstanding open positions shall result in compulsory delivery. 20th day of the delivery month. If 20th happens to be a holiday, a Saturday or a Sunday, then the expiry date (or due date) shall be the immediately preceding trading day of the Exchange, which is other than a Saturday. FSP shall be arrived at by taking the simple average of the last polled spot prices of the last three trading days viz., E0 (expiry day), E-1 and E-2. In the event the spot price for any one or both of E- 1 and E-2 is not available; the simple average of the last polled spot price of E0, E-1, E-2 and E-3, whichever available, shall be taken as FSP. Thus, the FSP under various scenarios of non-availability of polled spot prices shall be as under: Scenario Polled spot price FSP shall be simple average availability on: of last polled spot prices on: E0 E-1 E-2 E-3 1 Yes Yes Yes Yes/No E0, E-1, E-2 2 Yes Yes No Yes E0, E-1, E-3 3 Yes No Yes Yes E0, E-2, E-3 4 Yes No No Yes E0, E-3 5 Yes Yes No No E0, E-1 6 Yes No Yes No E0, E-2 7 Yes No No No E0 06

7 Quality specications Parameter Staple Length Specications Staple Length: Basis 29 mm, as per Standard HVI Mode of Assaying Tenderable Range: Below 28.0 mm = Rejected 28.0 to 28.4 mm = Disc. of 2% 28.5 to 28.9 mm = Disc. of 1% 29.0 to 29.5 mm = No Premium/ Discount 29.6 to 30.0 mm = Prem. of 1% 30.1 to 31.0 mm = Prem. of 2% Above 31.0 mm = No additional Premium Micronaire Micronaire: Tenderable Range: Below 3.5 = Rejected Below 3.6 and upto 3.5 = Discount of 0.3% 3.6 to 4.8 = Basis (No Premium/ Discount) Above 4.8 and upto 4.9 = Discount of 0.3% Above 4.9 = Rejected Strength Strength: With HVI mode of assaying Basis: Min. 28 G/Tex with no premium above 28 G/Tex Colour Grade Color Grade: Upto Standardized HVI Middling 31-3 accepted upto 41-3 with discount of 5% Trash Trash: Basis 3.5% Tenderable Range: Above 3.5% and upto 5% = Discount of 1:1 Below 3.5% and upto 2% = Premium of 1:0.5 Above 5%, goods will be rejected Moisture Moisture: Basis 8.5% Acceptable up to 9.5% maximum with moisture adjusted weight Short Fiber Index (SFI) Short Fiber Index (SFI) = Maximum 8.5 Premium/ discount for delivery location difference: Commodity (Base Centre) Additional Delivery Centre (+) Premium/ (-) Discount 29 mm Cotton (Rajkot) Kadi - Rs. 50 per bale 07

8 Benets of trading at NCDEX Most liquid cotton complex Benet of hedging across upstream / downstream product line Simple and efficient delivery process Electronic tracking system COMTRACK Supervised production of bales for deposits ensuring quality of material deposited Non empaneled ginners to go through stricter norms so as to maintain quality of material deposited Quality of the material deposited with NCDEX will be displayed on website for the benet of the market participants No weight shortages to buyers Remat process will give buyers ample chances to check the material delivered to them Complete bouquet of Cotton complex available at one platform Delivery centers only in Gujarat to remove any ambiguity among buyers regarding location of allotment of deliveries 08

9 Models for physical deliveries 1 Deposits through supervised process Bales for deposits at NCDEX platform to be produced under supervision of WSP A ginner will have to get empaneled with the WSP before participating on the Exchange platform A representative from NCDEX's WSP will remain present during production of bales at empaneled ginner's location Tamper proof process for collection of samples from a lot of 100 bales, tagging of each bale, stack sealing, lifting from ginner's warehouse and transportation to NCDEX approved warehouse 2 Deposits through other categories of participants without any supervision In this model there would be no supervision; Any market participant would be allowed to participate in deposits As compared to supervision model sampling and testing would be for 7 to 10 bales in this model Sampling of 7 bales at NCDEX approved warehouse will be compulsory and rest 3 at depositor's location will be optional and depend upon the depositor Sampling of 5 bales at ginner's warehouse List of empaneled ginners will be published on the NCDEX website This process will increase buyer condence in bales delivered on the Exchange 09

10 Age penalty Age penalty is quality discount based on time and attributed to the assumed deterioration in the quality of Cotton lint over a period of time. As season for Cotton lint arrival starts in October a xed discount on quality is imposed from March expiry till July expiry. The age penalty for different months is as follows: Delivery in month of expiry Age Penalty(%) March & April 0.2 May & June 0.3 July 0.4 Moisture adjusted weight Moisture: Basis 8.5%; Acceptable up to 9.5% maximum with moisture adjusted weight The weight after deducting standard allowances and moisture discount (by weight) will be credited to the depositors COMTRACK A/c by warehouse service provider point or below; Since the buyer will be buying the goods at basis moisture level after application of MAW at the time of deposit, if at the time of delivery out, the moisture level is higher than the basis moisture levels, the WSP has to also deliver the buyer the difference quantity proportionate to the higher moisture content WSP has to deliver entire withdrawn quantity provided the lifting is done by EDD and the outbound moisture level is at basis If outbound moisture is less than basis, the quantity equivalent to that of basis moisture will be compensated to the buyer 10

11 Display of quality report on the website Sr. No. Location Staple Length Micronaire Strength Colour Grade Trash Moisture SFI Premium/ Discount (%) Category of depositor (Supervised/ Unsupervised) Remat sampling process A buyer can go for remat sampling to verify the quality of material allocated found to be on premium side then the buyer will have to pay WSP, the extra amount 5 uncut bales will be allowed for testing Lot wise claim settlement will take place wherein if any lot is found to be on discounted side as compared to allocated grade then WSP will be liable to compensate the extra amount but if a lot is The price for compensation calculation would be FSP of the contract in which client has taken the delivery or spot price on the day of submission of remat papers, whichever is higher 11

12 National Commodity & Derivatives Exchange Limited Akruti Corporate Park, 1st Floor, Near G.E. Garden, L.B.S. Marg, Kanjurmarg (West), Mumbai T: F: Toll Free: E: askus@ncdex.com W: /TrustNCDEX Disclaimer: Trading in commodities contracts is subject to inherent market risks and the traders/investors should understand and consult their financial advisers before trading/investing. The contents in this publication are for guidance only and should not be treated as recommendatory or de-nitive. Neither NCDEX nor the NCDEX IPF Trust or their a liates, associates, representatives, directors, employees or agents shall be responsible in any manner to any person or entity for any decisions or actions taken on the basis of this publication. No part of this publication may be redistributed or reproduced without written permission from NCDEX. CIN: U51909MH2003PLC140116