H.R. 2620 amended the United States Cotton Futures Act to allow foreign cotton companies to participate in cotton futures trading.
- A futures contract is an agreement to buy or sell a commodity sometime in the future. They are generally considered more secure than immediate exchange since the extra time gives investors more information.
- Current law requires that all cotton included in a US exchange listed cotton futures contract be inspected and classified by the USDA. This makes it tough for multinational corporations growing and selling cotton outside the United States to gamble with cotton futures in the Wall Street If the cotton never comes to the United States, it won’t be inspected by the USDA and therefore isn’t allowed to be traded with futures.
“Current law, which requires sampling and classing by the USDA of every bale of cotton tendered under contracts listed on a U.S. exchange reflects an antiquated picture of the global cotton market. Some market participants need to hedge price fluctuations in foreign markets, and the current law limits their ability to do so. We need to update our law to reflect the modern nature of this marketplace.
H.R. 2620 accomplishes this by providing an option for cotton produced and delivered in foreign markets to be classed by rating facilities closer to the point of delivery rather than by the United States Department of Agri- culture. It makes no changes to the treatment of domestically produced and delivered cotton.
This legislation will allow any willing exchange to meet industry demand to design a world cotton contract. For example, ICE Futures U.S., which has already worked with market participants, has publicly announced their intention and preference to list a world cotton contract side by side with the domestically focused Cotton No. 2 contract they already list.”
Thank you to Congressional Dish for their outline of H.R. 2620. This version is edited by GovTrack.