Did China Kick Off Cotton’s Next Bull Leg?

Did China Kick Off Cotton’s Next Bull Leg?

Did China kick off the next bull market in cotton?

It’s been a rough go for King Cotton over the past couple years.  Since hitting post-Reconstruction highs in early 2011, it’s been a LONG way down (paging Sarah McLachlan).  But now that the king appears to have found a nice pillow to rest his head upon, is cotton primed for a comeback?  After all, there’s no cure for low prices like low prices.

Was this the start of a breakout in cotton?  It’s up another two cents since I snapped this screen shot a week ago. (via BarChart.com)

Just like the good old days of the 00’s commodity bull, China is being given credit for kicking off the latest rally.  Agrimoney.com reports:

“We seem to be getting some better ideas on demand,” said Keith Brown, at US-based cotton broker Keith Brown & Co, flagging signals that Europe’s economy “seems to be turning the corner”, while China “is putting in stimulus measures to stimulate the textiles industry”.

We’ve been keeping an eye on the cotton market since last spring (full analysis here).  It was the price crash that attracted us – anytime a commodity gets slammed, supply cuts are not far behind, and demand gradually rebounds to take advantage of the lower prices.

As an added bonus, corn and soybean prices have both rallied since our original cotton piece, and both complexes remain high today.  We could see farmers swap out cotton in favor of corn and beans – something that may really get this party started.