>As mentioned at the state meetings, the Memphis Cotton Exchange has tightened the rules a bit on weights delivered against a contract. Apparently there has been some confusion of what is expected as far as weights of bales and potential penalties when bales are made too light. Following the 2010 crop year, a number of gins around the country were making unusually light bales and expecting the Rule 19 penalties would be a cost of doing business. References to a contract lot tolerance were removed several years ago when weight rules were readjusted. The old rules had a 2% tolerance in them. They have now tightened the tolerance to 1% and added it to both Rule 19 and Rule 1.

This change brings the Memphis Cotton Exchange rules and tolerances in line with the ICE contrats. Merchants routinely hedge the cotton purchased in the US on the ICE board. Those future contracts are
based on a 1% tolerance. This doesn’t mean that every bale has to be 500lbs +/- 5 lbs. That would be an impossible standard to achieve. Merchants will be looking at contract averages as they compare to the 1% tolerance. This does not mean that Rule 19 weight penalties for individual bales has been eliminated. The new language is in addition to the old language.

Harrison Ashley with the National Cotton Ginners Association had a very informative conversation with Hope Brooks. Hope explained the changes along with the reasoning behind the changes. You can read the interview HERE. I encourage you to follow that link and read the whole exchange as well as the actual language that was adopted by the Memphis Cotton Exchange earlier this year.

Dusty