This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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 Prices: Room to Rise Even Higher

Stocks in this article: WMT JNY ANF HD M GAP


NEW YORK ( TheStreet) -- Cotton prices have nearly doubled over the past 12 months, making it one of the hottest commodities so far this year.

"Maybe cotton prices were just too low for so long," said INTL/FCStone Fibers & Textiles Senior Risk Management Consultant Andy Ryan. "The U.S. overproduced cotton for many years and was the cheap supplier to the world -- and it only takes a couple of bad crop years and low stock levels to get things going on the upside."

"Still," says Ryan, "no one's ever seen these prices before."

For years, mills had successfully bought cotton on call -- meaning that they would agree with merchants on shipping dates and all other details about a sale, but fix the prices later. Mills would then look for dips in the market before executing their buys.

But this year, "this backfired on them," said Mike Stevens, a Mandeville, La.-based independent cotton analyst who's spent more than 40 years in the cotton industry. Why? Because prices have been explosive.


That said, market research firm IBISWorld predicts that cotton farming revenue could grow by more than 80% in 2011. "We don't expect prices to start coming down until 2012, which will help keep industry revenue high," IBISWorld analyst Nikoleta Panteva explained.

IBISWorld projects industry revenue to grow at an average annual rate of 2.1%, riding on the wave of increased production and sustained high global prices, over the five years to 2016.

In 2010, U.S. cotton exports grew by 70%, with a drastic 151% increase in exports to China, according to the firm.

"Cotton," says Ryan, "really is a global crop."

"It's produced in huge amounts in a few countries, but it's grown in a lot of places around the world" and is becoming one of the commodities that are consumed more and more as countries such as China and India move from developing nation to developed nation. "It's textiles, clothes -- they start to put more things in their closet when they become affluent." This part of the cotton price story, says Ryan isn't going away any time soon.

But beyond the China and India growth story, there's also been a complex web of other big stories that have been major forces in determining the direction of cotton prices.

To find out what they are, read on -- and also learn about price forecasts for the coveted crop and how its doubling affects you -- the consumer, at the retail level ...

1 of 7

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!

Markets

DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

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