Greyson S. Colvin submits:Cotton prices are at record levels, near $1.70 per pound as supplies are at their lowest levels since 1993. We expect prices will continue to appreciate in the first half of 2011 as there is not enough cotton to go around and the deficit in supplies will continue to widen due to reduced production estimates.
International Commodity Exchange (ICE) cotton futures for December delivery fell 0.6% Thursday to an 18-month low of 72.06 cents/pound – a level last seen November 23, 2012. A similar trend was seen in the iPath DJ-UBS Cotton Subindex Total Return SM Index ETN (BAL), which declined 0.5% (23 cents) to $48.68 on Thursday. Since the start of the year, cotton futures have fallen 15% and are currently down 26% from their March 26 high of 97.35 cents/pound.
Why hasn't inflation caught up with a monetary-induced boom in China?
One might argue that China's policy of keeping the renminbi cheap amounts to an export subsidy that has been an important factor fueling its growth. But that thesis is puzzling to economists who reason that a cheap-currency policy can only get you so far. Paul Krugman explains:
By CommodityHQ: Cotton, the fluffy commodity, was one of the most talked about investments of 2010. With a number of factors combining, cotton prices spiked to historic highs last year and led to a number of investors jumping in on the trend, only to get burned when cotton tanked midway through 2011. Global consumption for this year was expected to surge, but unfortunately, the expected 120 million tons of cotton use was revised down to 113 million after issues in China and Pakistan led to lower demand.
Money Morning submits: By Don Miller Reacting to a potential squeeze that threatens to drive up cotton prices, the biggest cotton-futures exchange took measures last week to prevent speculators from taking big positions.
Two years ago China amassed half the global supply of Cotton with huge price supports in an effort to encourage more cotton production. China "succeeded".Farmers produced, and the state paid more for cotton than farmers could get elsewhere. Worldwide supplies soared, but the cotton was withheld from the market. China's Cotton Policy "Success" Story
Investment U submits:
By Tony D'Altorio
Cotton prices have surged beyond $2 a pound, the highest level they’ve ever hit. The fiber didn’t even go that high during the Civil War’s cotton embargo.It is now up 170% since a year ago, and more than 40% since the beginning of 2011. Short-term squeezes have definitely contributed, as mills scramble to buy futures contracts to fix physical supply prices. But there are solid fundamentals to blame as well.