Raw Material Cover & Price Exposure Sheet

How to read this sheet

Exposure is cotton required by firm sales less cotton whose price is fixed, and the sign is the whole message: positive is short, where the selling price is agreed and the buying price is not, so a rise lands on margin with nothing to pass it to; negative is long, where cotton is priced and not yet matched to a firm sale, which a falling market devalues and which has ruined mills after a good harvest. Volume cover and price cover are reported separately because cotton contracted at an open price secures tonnage and secures no money, and a mill quoting days of cotton is usually quoting the first. Cotton required is yarn divided by realisation and never multiplied by it: a kilogram of yarn takes more than a kilogram of cotton, and the difference at 85% is a sixth of the requirement. Realisation is taken as a single mill-wide figure, so a mill running counts with materially different realisations should run this per count group or use a weighted figure. Yarn sold on an open or formula price is neither cover nor exposure here and is excluded from both sides; it carries a different risk, which is that the formula moves against you. Nothing in this sheet forecasts a price, recommends a position, or constitutes advice on whether to hedge: the movement is a scenario the user enters, and the answer is what that movement would do to a position the user has described. Timing is not modelled - cotton arriving after the yarn ships is not cover however it is priced - so a position that nets out here can still fail on delivery dates.