Lower gas prices could translate into more money for such discretionary items as cotton goods. Energy cost factored into plans for new U.S. yarn spinning plant.
Cotton futures rallied from early losses to finish in the green Tuesday, settling above previous-session highs.
Spot July closed up 88 points to 86.92 cents, in the upper quarter of its 166-point range from down 58 points at 85.46 cents to up 108 points at 87.12 cents. The rally stalled shy of its 40-day moving average.
December gained 66 points to settle at 86.16 cents, four ticks off the high of its 140-point range from down 70 points at 84.80 to up 70 points at 86.20.
Volume increased to an estimated 18,100 lots from 16,702 lots the previous session when spreads totaled 4,695 lots or 28%, block trades 330 lots, EFP 247 lots and EFS 8 lots. Options volume totaled 1,082 calls and 3,568 puts.
Mild inflation pressure in recent months, most specifically seen in lower gasoline and oil prices, as reported by Dow Jones Newswires, could help offset the strain on consumersΆ wallets caused by tax increases earlier this year.
Falling crude oil costs typically translate to lower prices at the pump, and this in turn could mean more money for consumers to spend on discretionary items such as cotton goods.
Data reported by the Labor Department showed the price index for goods imported into the United States decreased 0.5% in April from March, led by the declining cost of oil.
The prices of imported petroleum products declined 1.9% during April and are down 9.5% from a year ago.
Growing domestic supplies of petroleum, made available through “fracking” and other technologies, is lessening U.S. demand for foreign oil, which helps keep prices in check.
The International Energy Agency was quoted by Dow Jones as saying that North American oil production will dominate worldwide supply growth over the next five years.
Separately, more than a decade after the last major home textiles mill closed in the United States, there are plans to open what would be the first new yarn spinning plant in this country in more than 20 years, according to Home Textiles Today.
And itΆs an Indian company — Alok Industries — thatΆs planning to do so, the report said.
Alok said it is finalizing plans to reopen a closed mill in the U.S. Southeast later this year. Alok will bring in new equipment for the plant, which will supplement rather than replace production in India.
The company declined to be more specific on exact location or timing, the Home Textiles report said, but added that it was working with an unidentified American retailer on the project.
The new plant would be a spinning plant only, making yarn which then would be sent to Latin America for weaving and finishing.
Arun Agarwal, president of Alok International, the U.S. subsidiary based in Dallas, was quoted as saying it was a financial decision.
“Energy is driving this,” he said, citing U.S. energy costs that are a fourth of what they are in India. He also said the availability of American cotton made the business model workable. While India is the second largest cotton producer after China, the United States is third and generally considered to produce higher quality.
Alok is a diversified manufacturer of home textiles, garments, apparel fabrics and yarns, selling directly to mills, exporters, importers, retailers and to some of the worldΆs top brands.
Futures open interest gained 422 lots Monday to 181,993, with JulyΆs down 637 lots to 119,820 and DecemberΆs up 861 lots to 58,879.
Certificated stocks grew 4,271 bales to 504,241. Awaiting review were 8,877 bales.
World values as measured by the Cotlook A Index dropped 40 points Tuesday morning to 93.25 cents. The premium to MondayΆs December futures settlement widened four points to 7.21 cents.