From Cotton Grower Magazine – November 2014
We’ve all heard that good things come to those who wait.
That may also be the case with the proposed World Cotton Contract, now in its final stages of development by IntercontinentalExchange (ICE).
The contract, which has the blessings of the American Cotton Shippers Association (ACSA) and the International Cotton Association (ICA), is designed to work alongside and be complimentary with the longstanding No. 2 cotton contract. The No. 2 contract will maintain its current focus on U.S. grown cotton, while the new world contract will provide expanded growths of cotton from around the world and several new delivery points.
Yet launch of the new contract – originally set for late 2014 – has been postponed to early 2015 as ICE continues to sort through regulatory issues in Malaysia, which was targeted as one of the new delivery points, and procedural issues in the U.S.
According to a recent Reuters report, Tim Barry, ICE Futures vice president of product development, presented an update during the ICA annual meeting in Dubai in October. He noted that Malaysia is set to announce changes to its agricultural import rules in January, and those changes could impact the country’s involvement.
“If Malaysia remains workable, we will include it,” he stated. “If not, we have to look at additional delivery points.” He indicated that Taiwan and Sri Lanka may be possible alternatives or additions.
As part of the ongoing program development, ICE is also seeking congressional action to remove a legal issue regarding listing in the United States. According to the Reuters report, under the U.S. Cotton Futures Act, only USDA is allowed to class cotton for delivery. When the Act was written, of course, there was no discussion or conception of a global contract.
“We very much want to keep the contract in the U.S. for a variety of reasons,” said Barry, although ICE does have other listing options for the contract in mind.