by Alexander Cain
While the economy is still not meeting growth expectations, some commodities are experiencing a recent boom thanks to an increase in foreign demand. Cotton, one of the commodities experiencing recent growth, has gone from experiencing its lowest demand in 2008 to seeing its price quadruple over the past few months. This growth has offered opportunities to farmers who were once displaced because of the recession and speculators who look to invest in this plant’s growth.
As reported in The Los Angeles Times, many California and cotton farms in the South are starting to show profitability again as U.S. farmers try to meet increased foreign demand, which has been caused by shortages in the major cotton producers overseas due to bad weather and the continued demand from emerging economies like China and India.
According to a forecast report by the United States Department of Agriculture, China, the world’s largest user and importer of cotton, is experiencing the smallest cotton stockpile in decades. This has caused U.S. cotton producers to up their production to meet demand. Cotton growers in California are expected to plant a total of 309,000 acres of Pima cotton (cotton typically used for higher-end clothing products) and upland cotton this year. This is a 54 percent increase from last year’s production. Farming has also gone up in parts of the South and rural America as the total cotton planted grew around 21 percent this year and the total harvested spiked at 51 percent growth compared to last year. With the increase in demand, it also gives rise to jobs for farmers displaced due to the recession.
“It feels so good to think that things could be good again,” said Kathy Neves, office manager of Huron Ginning Co. which is rehiring 30 workers and turning on machines this fall. Seed sellers who act as the connecting point between raw material producers and manufacturers are enjoying the profits as producers arrive in throngs trying to sell their plants. The effects have trickled down from the actual producers to the seed sellers to those who work within the financial markets.
Many financial analysts have taken advantage of the growing commodity pricing of cotton over this past fall. In November 2008, cotton futures-contracts guaranteeing to sell cotton at a certain price at a future date- fell to 37 cents, lowest level in nearly a decade. Compare that to today, where price has risen to a high of $1.57. Many financial analysts are expecting the price to continue to rise and are looking to invest in the cotton commodity market. While many are profiting on the resurrection of the cotton industry, consumers may face higher prices come next year.
Companies such as GAP and J. Crew are seeing a 20% increase in cotton prices, which means consumers will have to compensate for the increase. While this isn’t expected to come into effect until next year, consumers should be aware of the impending price increase.
