Cotlook Limited has formally announced their intention to discontinue the Northern Europe “A” Index effective August 1, 2008.
In 2004, Cotlook began publishing an “A” Index for the Far Eastern markets along side the Northern Europe index, and will continue to publish the Far East “A” Index. The index is considered to be an objective and representative measure of offering prices in the international cotton market.
“Cotlook’s decision is justified given the dramatic shift in cotton mill use and trade," said National Cotton Council Chairman John Pucheu of Tranquillity, California. "The decline of the textile sector in Europe has sharply reduced trade to key European markets.”
The loss of the Northern Europe index has ramifications on the marketing loan program as several aspects of the program reference the Northern Europe quotes. These include the determination of the adjusted world price and price triggers for Steps 1 and 3.
Cotton industry leaders, in anticipation of the formal announcement, began exploring the impacts of the change in the index and will examine options that allow the program to continue to work effectively. In addition, the industry will work with USDA officials and key Congressional committees to ensure an appropriate transition to the Far East index as part of development and implementation of the next farm bill.