IMPRESSIONS from a Cross-section

Greek cotton market – Changes following the reforms on economy

The Greek cotton market was very much criticized this season (10/11). In few words our crop experienced serious problems (green worm, heavy rainfalls) before and during harvesting that affected strongly quality in terms of color and partly quantity. In combination with the NY futures rally and the high production cost, many ginners didn’t or couldn’t deliver their forward sales and defaulted or partly shipped the low price contracts. The ones who totally defaulted are already, or will be soon, listed on the International Cotton Association (ICA) black list. The ginners, who partly delivered due to problematic yields of specific areas, have agreed to ship the balance of existing contract during new crop (11/12).

Apart from these cotton sector problems, our economy is struggling to get out of its huge deficit activating a mechanism settled by the International Monetary Fund and European Central Bank. Our status right now is not so promising and this will surely bring changes on our cotton market.

Banks who are facing a cash flow problems, have become tougher with credit lines which means that next season many ginning firms or cooperatives will have to find alternative ways for their cash flow. It is estimated that since they will not afford to keep the cotton in their warehouses and at the same time pay the growers for the seed cotton deliveries, many ginning firms will be obliged to slowly sell their lint cotton from the beginning of the ginning season. In addition, a possible dropping NY futures market during September and October may create serious problems in direct sales and this is definitely leaving a bigger room for merchants.

From their side, international merchants have decided to work with fewer and selected suppliers that they can depend on during hard times. This can be easily justified by the new crop forward sales. So far merchants who are still active on the Greek market have purchased volumes of the new crop from maximum five ginning firms, openly avoiding the ginners who either default or just bring up problems whenever the market is not on their favor.  

The Greek domestic spinning sector is suffering even more this season due to higher rates that banks are charging for their loans. Already a major spinner has decided to pause the operations of one unit while other big players feel uncomfortable with this situation. Unfortunately, the spinning mills survival is debatable this season in our country. Of course in case domestic consumption decreases to lower than 35,000 tons, our crop will become almost net exporting (more than 90%).  

The only optimistic thing right now is the new crop status. According to cotton seed companies the acreage that will be professionally cultivated is about 290,000 hectares (100,000 hectares higher than last season). Replanting percentage was not higher than previous seasons but it seems so far that the crop is about two weeks late due to rainfalls and lower than usual temperatures. Growers believe that provided the weather becomes favorable cotton plants will partly recover.