Hedge funds seem to have good reason to be optimistic on cotton prices going forward, judging by the performance of other commodities. The CRB index closed at 349.19, which is just a little over 12 points shy of its all-time record set in May 2006.
Spot gold traded briefly over 800 dollars yesterday and crude oil traded at 96 dollars this week before settling at 93.49 dollars. The grain complex remained on a firm footing as well, as Dec'08 corn settled at 4.17 dollars, while Nov'08 soybeans closed at 9.60 dollars. Even though spot wheat came under some pressure, its Dec'08 contract still pays 6.81 dollars.
The strong performance of the above mentioned commodities is underpinning the price of cotton. For example, crude oil is the raw material for most man-made fibers and unless these fibers are heavily subsidized by the government, this will divert some consumption towards cotton.
A strong grain complex will without doubt steal acres away from cotton when plantings decisions are made a few months from now and rising gold prices are a reflection of the rapidly expanding money supply all over the globe, which dilutes the value of currencies and leads to higher nominal prices of just about everything.
marketing@alchempro.com
