Agriculture is all the rage right now, but where is that cotton exchange traded fund (ETF)?
Demand for this soft commodity hasn’t dropped. You’re probably wearing some of it right now. In fact, rapidly growing middle classes from emerging countries such as China, India and Latin America are buying more jeans, t-shirts and hats, reports Money Morning.
Because of the popularity of agriculture, farmers are seeing dollar signs and using their farms for profitable crops such as corn and soybeans, particularly after the ethanol demand put more pressure on these crops.
According to the National Cotton Council, U.S. growers are going to decrease the acres of cotton growing land around 14% less than in 2006, and the 2008 decrease will be lower. Growing demand and decreasing production means cotton is only likely to become a lot more pricey.
China is wasting no time in back-stocking the resource, and has purchased while cotton is still cheap. China is so serious about cotton that it has created its own cotton futures market.
While the London Stock Exchange has a cotton-specific ETF, most U.S. investors cannot tap into the commodity just yet.
While you’re waiting for such an ETF to appear, you can at least follow the booming agriculture sector with Market Vectors Agribusiness (MOO) or PowerShares DB Agricultural Fund (DBA).
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.