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Attention Commodity Shoppers: Cotton’s Blue Light Special

by Brett on May 31, 2012

Cotton futures have quietly dipped to their lowest levels in two years, prompting our “contrarian alert” to sound. King Cotton, since rocketing to levels not seen since Reconstruction, has since plummeted:

cotton five year price chart

Cotton spikes, and crashes. (via Barchart.com)

Two months ago we mused that cotton and rice, both off significantly from their highs, may have piqued the interest of Jim Rogers, who recommended that investors interest in agriculture start by looking at what’s down the most. Since then, cotton has drifted nearly seventeen cents lower, and is now sitting at levels not seen since early 2010.

On Cue: Supply Cuts Have Arrived

Just as high prices tend to cure themselves with increasing supply and/or decreasing demand, low prices commonly exhibit the equal but opposite effect. And we’re already seeing signs of supply going away, as China will decrease cotton plantings by nearly 10% this year…

Please read my full cotton analysis on Seeking Alpha.


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