This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Cotton Demand to Boost Commodities ETFs

NEW YORK (TheStreet) -- iPath DJ-UBS Cotton Total Return Sub-Index ETN (BAL), ELEMENTS Rogers International Commodity Agricultural ETN (RJA) and iPath DJ-UBS Agriculture Total Return Sub-Index ETN (JJA) should all benefit from rising cotton demand.

Demand in China and India for cotton has surged and is expected to remain robust. The world's largest cotton consumer, China, has seen demand for the commodity jump nearly 24%, and trends in in India are similar.

An expanding middle class in both nations is starting to spend more, particularly on clothing. In fact, retail sales of garments, hats and knitwear in China have jumped by 24% from a year earlier, according to Bloomberg.

In India, the Cotton Advisory Board recently announced that mill use is expected to increase by 8.9%, pushing total demand for cotton up nearly 26% year over year.

On the supply side, the U.S. Department of Agriculture says that cotton production is expected to fail to keep up with demand for a fifth straight year. This trend has started to eat away at inventories. As of July 31, U.S. stockpiles as of July 31 were at their lowest levels in the past 14 years.

Meanwhile, supplier warehouses monitored by the IntercontinentalExchange are down 98% as of Aug. 12. And worldwide stockpiles of the cotton are expected to decrease by 4.1%, to roughly 38% of demand, the lowest ratio since 1994.

Moreover, crop damage is expected to take its toll. Floods and landslides in China have destroyed cotton crops, and Pakistan, the world's fourth-largest grower and importer of cotton, has had floods that have destroyed nearly 30% of its crop.

In conclusion, imbalances in global supply and demand may result in positive price support for cotton. Some ways to play the commodity include:

iPath DJ-UBS Cotton T Sub-Index ETN.

ELEMENTS Rogers Intl Commodity Agri ETN, which allocates nearly 12.03% of its assets to cotton.

iPath DJ-UBS Agriculture TR Sub-Idx ETN, which allocates nearly 7.1% of its assets to cotton.

Although supply and demand imbalances indicate that positive price support is likely to occur in cotton, it is important to consider the inherent risks involved with investing in commodities. To help protect against these risks, it's important to use an exit strategy that identifies specific price points at which downward pressure is likely to occur. Such a strategy can be found at www.SmartStops.net.

-- Written by Kevin Grewal in Houston.

At the time of publication, Grewal had no positions in securities mentioned.

Readers Also Like:

Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net , where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,985.61 +78.99 0.47%
S&P 500 1,972.83 +9.12 0.46%
NASDAQ 4,419.0340 +27.5710 0.63%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs