While one farmer says cotton gives a better return per hectare than any other crop, it’s also a water intensive endeavor. Its crop last year was the worst in three decades – so bad that many farmers are not even bothering with it this year.
Luckily, the United States is actually the leading cotton exporter, and second to China in production, so Australia’s falling production shouldn’t weigh down the industry too much.
iPath Dow Jones-AIG Cotton Total Return Sub-Index ETN (BAL) gives exposure to this shrinking industry through futures contracts, and is 100% cotton. Since its July 22 inception, it’s down 3.1%.
A cotton shortage could wind up stretching returns in this fund. The cotton industry is projected to produce 124.5 million bales in 2008-2009, down 1.4 million bales since July. World production is predicted to be down 2.8 million bales from July, according to the Cotton World Fax Update.