The fact that merchants were fully hedged with futures against old crop supplies certainly helped matters along because the futures market dropped considerably more than the international price as measured by the A-index or AWP. While NY March has fallen by around 650 points from recent highs, the AWP has given back less than 300 points during the same period.
For new crop loan cotton the situation is quite different, because a drop in NY futures does not automatically reduce cash prices by the same margin, as their price is dependent on the AWP or the loan plus accrued carrying charges, whichever calculates lower.
Right now the AWP is once again the cheaper of the two at 52.75 cents. Even though a lot of merchants and coops did sell NY futures against loan equities when March was near 70 cents, they don't necessarily apply these futures gains to their cash offers.
They may simply take the profit on these short futures, keep the cotton in the loan and wait for another opportunity to present itself over the next 7 to 9 months.
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