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Quick Take: Falling Cotton Prices to Boost Denim Manufacturers

NEW YORK (TheStreet) -- While many key commodites such as cocoa and beef are on the rise, one is well below its historical average: cotton.

RealMoney Pro contributor Chris Versace told TheStreet's Brittany Umar cotton prices should continue to decline. The dramatic decline can explained by the enormous inventory buildup. Currently, there are around 100 billion bales of cotton in inventory worldwide, he said. 

Furthermore, the U.S. Agriculture Department expects cotton farmers will grow even more cotton this year, increasing their plantings by about 10% from year-ago figures. 

But Versace said China is another potential factor. The country has a ton of cotton and will likely begin liquidating it soon, creating even more selling pressure. 

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So who benefits from falling cotton prices?

Mostly clothing companies. Specifically,  Hanesbrands (HBI) and Polo Ralph Lauren (RL) should benefit as well denim manufacturers like Guess? (GES), Joe's Jeans (JOEZ) and V.F. Corp. (VFC), Versace said.

-- Written by Bret Kenwell in Petoskey, Mich.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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