The exchange traded note (ETN), iPath DJ-UBS Cotton (NYSEArca: BAL), which gives investors exposure to the rising price of cotton, is hopping today as prices surge to new highs.

Cotton is already high – it’s gained 36% this year alone. In the last year, prices have doubled. That trend isn’t showing any signs of slowing today: it’s mere cents from $2 a pound and the daily permitted limit. There’s no single  scapegoat for the rise, either:

  • Bad weather in Australia, India and Pakistan put a hurting on the most recent harvest.
  • That has tightened the supply, yet demand is as high as ever. China is the world’s largest consumer of cotton, and its imports of the fiber have risen 31% year over year, says The Wall Street Journal.

Retailers had been holding off on passing along the rising prices to consumers, but now they’re getting so high that they seemingly have little choice but to do so. With demand remaining as strong as it is, cotton prices may not be stepping back anytime soon.

Year-to-date, BAL is up 33.9%; in the last year, it’s up 171.5%. [What’s the Difference Between ETFs and ETNs?]

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.