The delivery specification changes: (1) increase the minimum strength requirement to 25 grams per tex; (2) establish "old crop" price differentials; (3) clarify the definition of a "warehouse bale tag coupon"; and (4) if at some future date the United States Department of Agriculture (USDA) shall commence quoting price differentials for cotton having a micronaire level of 4.8 or 4.9, allow for corresponding price differentials for such cotton under the futures contract.
The listing of the May 2003 Cotton No. 2 futures and options contracts had been delayed for a brief period to allow for the completion of the CFTC approval process. The changes in the delivery specifications and their implementation as well as the specific by-law sections and rules amended are as follows:
NEW STRENGTH REQUIREMENT
Under amended By-Law Sections 6.02 and 6.03, the minimum strength requirement for Exchange deliveries is raised to 25 grams per tex ("gpt"), from the current 22 gpt, effective with the May 2003 delivery. Existing stocks of certificated cotton with a gpt reading below 25 will no longer be deliverable after the March 2003 delivery. Currently approximately 10% of certificated stocks have a gpt reading of less than 25; prior to January 1, 2002, the Exchange will begin to disclose regularly the number of bales in certificated stock with a gpt of less than 25.
AGE DISCOUNT
Amended By-Law Section 6.03(pp) establishes a new Age of Bale discount or penalty, which will apply to all cotton delivered in a calendar year that is two or more years later than the cotton's year of growth (defined as the marketing season during which the cotton was grown). Cotton delivered in the second calendar year after its year of growth shall carry a two cents per pound penalty; an additional two cents per pound penalty will apply for each additional calendar year after the second. For example, cotton grown in the 2002/2003 marketing year would accrue a two cents per pound penalty beginning on January 1, 2004; a four cent per pound penalty beginning on January 1, 2005; and a six cent per pound penalty beginning on January 1, 2006, etc.
The new Age Penalty will apply to all deliveries commencing with the May 2003 delivery. This means that cotton grown in the current 2001/2002 season that is delivered against the May 2003 contract will carry a 2 cent per pound Age of Bale penalty; cottons delivered against the May 2003 contract that were grown in the 2000/2001 season will carry a 4 cent per pound penalty.
MICRONAIRE DIFFERENCES
Amended By-Law Sections 6.02 and 6.03 and amended Rules 3.08 and 3.09 establish a new commercial difference for cotton in Exchange deliveries which have a micronaire reading of 4.8 to 4.9, if such a difference is calculated by the USDA. If no such difference is calculated by the USDA, the difference for Exchange deliveries shall be zero. (No such difference is currently calculated by the USDA.) This new commercial difference for 4.8 and 4.9 micronaire cottons will apply to all deliveries commencing with the May 2003 delivery.
WAREHOUSE BALE TAG COUPON
Amended Bylaw Sections 6.03(dd) changes the definition of a Warehouse Bale Tag Coupon by specifying that an Official Warehouse Bale Tag Coupon must be one that is issued by the warehouse. This definition becomes effective with the May 2003 delivery.
The New York Board of Trade (NYBOT) is the parent company of the New York Cotton Exchange (NYCE) and the Coffee, Sugar & Cocoa Exchange, Inc. (CSCE). Through its two exchanges and their subsidiaries and divisions, including the New York Futures Exchange (NYFE), FINEX, and Citrus Associates, NYBOT offers a wide variety of agricultural, currency and index products.
