Cotton ETN: Not Getting Washed Out | ETF Trends

Everyone wants cotton, apparently. That’s got those who grow it anticipating higher prices, tighter supplies and – for investors – a shortage could weave better returns for the cotton exchange traded note (ETN), too.

Cotton may get stretched to its limit in the near future: as demand is high, inventories are tight and people in emerging markets want it for everything from sheets to clothing.

As a result, iPath Dow Jones-AIG Cotton Total Return Sub-Index ETN (NYSEArca: BAL) is up 9.7% year-to-date, and up 14% in the last month. [The ETN Industry Comeback.]

  • The world’s largest cotton consumer, China, has seen demand for the commodity surge nearly 24% and demand growth in India is similar, says Kevin Grewal for Daily Markets.
  • Across all emerging markets, a growing middle class is buying up shirts, sheets and anything else calling for the material, straining supplies. [Withering Crops Boost ETFs.]
  • The U.S. Department of Agriculture says that cotton production isn’t going to keep up with demand this year. Inventories are already at their lowest level in 14 years.
  • Jennifer A. Johnson for Bloomberg reports that U.S. cotton exports are off to their fastest start since 1993, potentially delivering a nice boost to the U.S. economy. [Are Ag ETFs A Part Of Your Portfolio?]
  • Cotton for December delivery on ICE Futures U.S. in New York reached 85.71 cents on Aug. 13, the highest level since April 28. The 31% gain in the 12 months through Aug. 13 was the third-biggest in the Reuters/Jefferies CRB Index of 19 commodities.

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.