The high cotton prices have not only resulted drop in demand and also cancellation of order from cotton buyers. U.S. witnessed largest cancellation so far this season since October from its largest buyer.
According to US government data, Turkey and Vietnam who is the top consumer of natural fiber due to high price have cancelled of bulk orders, of around 35,000 bales. The biggest net cancellations in a month came after prices jumped toward August highs near 94 cents a lb amid concerns about depleting domestic supplies.
USDA data reveals that Turkey has committed to buy some 1.86 million running bales of cotton for the current season to end-July. But as dropped at least 19,300 bales order.
Apart from Turkey, buyers in Vietnam who is in the fourth position as a buyer of U.S. upland cotton so far this season behind Turkey, China and Mexico. Vietnamese mills were some of the worst offenders in defaulting on contracts, according to the International Cotton Association. Vietnam has cancelled a net of 11,700 bales in the most recent week.
Cancellations were also reported for India, Italy, and Egypt. Concerns over tight U.S. supplies have supported prices so far this season as farmers harvested their smallest crop in four years. Some saw the cancellations as grounds for worry as it can hammer the market.
According to the market sources, the orders may be delayed or rolled forward in hope of lower prices. Traders said that the cancellations were likely of "on-call" sales, which are booked but priced at a later date.
Mills who have on hand contracts are suffering right now. While, some think that cancellation of the contract is a better option than fixing (prices) at these levels.
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