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My Big Miss in Cotton

Submitted by madhedgefundtrader on 10/02/2010 08:52 -0400

China
India

Those lowriders you have been buying your girlfriend every Christmas are about to get a lot more expensive. Since the Great Ag Boom of 2010 started in May, the white staple has rocketed 38% to over $1/pound, a 15 year high, and only the second time since the Civil War that it has broken the buck. The cotton ETN (BAL), is up an eye popping 60%.

Rapidly rising standards of living have encouraged demand for cotton to explode in China and India. Heavy rains in China, the world’s largest producer, have caused much of this year’s crop to rot, and local traders have been paying as much as $1.45/pound. Imports of cotton into the Middle Kingdom have doubled this year.

Much of the crop in Pakistan was destroyed by their recent floods, and India has imposed an export ban. Mills in the US and Europe are now hoarding bales to head off further shortages and price increases. In recent months, the futures exchanges have increased margin requirements to keep hedge funds at bay, which are believed to have doubled long positions in recent months. This has put the squeeze on producers and middlemen alike.

As much as I try, I can’t catch each move in every commodity in the world all the time. Instead, I’ll take the lessons home that the world economy may be stronger than we realize, and that long predicted inflation is approaching, just not from the direction that we expect.

To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.

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Wed, 11/10/2010 - 06:30 | 715670 cheap uggs for sale

Sat, 10/02/2010 - 18:06 | 621359 BeerGoggles

Why are there so many people on ZH selling their newsletter recently? Anyone selling a newsletter is clearly mugging people so they can then make risk free trades for themselves.

Sat, 10/02/2010 - 15:48 | 621166 Reese Bobby

China and India make most of the world's cotton. Maybe Timmy could ask them where they planning to fix prices. You know, "pretty please"...

Sat, 10/02/2010 - 15:24 | 621139 sbenard

Cotton was (past tense) my favorite/best trade for 2010. But it has turned bearish this week. I bailed when it took out Thursday's low. It has a long way that it can fall!

Sugar too! It was my 2nd favorite trade for 2010.

Sat, 10/02/2010 - 16:58 | 621112 ToNYC

Cotton is a natural widow maker like natty gas...lots of places to hide the salami there and bye n' bye. California will be trading in hemp futures in 2011 and the nails are building up around the coffin.

Sat, 10/02/2010 - 14:01 | 621043 Porkbellytrader

"Unlike oil, cotton has no limits on how much can be grown or stored in a good year creating a large product pool to draw from."

Yes, there are limitations to growing cotton, as it can only be grown in certain climates, which why you don't see cotton grown in North Dakota or Minnesota for example. While farmers in cotton growing areas can substitue corn or soybeans, farmers up north cannot make the switch, hence there can competetion for cotton lands from row crops if prices get high enough, and cotton prices fail to keep up.

And yes everything mentioned in the top article has been priced in to the market, and the only bullish under-pin left (for now) is what US cotton remains to be harvest and whether or not there are any weather issues.

Your article on cotton IMO is irresponsible and could be risky to a naive reader. This is very true...trading futures is much harder than it looks and one easily be seperated from one's cash if one is not paying attention.

Sat, 10/02/2010 - 12:25 | 620893 onlooker

madhedgefundtrader

Dear Sir:

You appear to be in the investment business and possible soliciting customers here on Zero Hedge. Your article on cotton IMO is irresponsible and could be risky to a naive reader. You must be aware of the tremendous risks involved in futures trading and should give out full disclosure regarding the risks of commodities leverage, limit moves, locked in, and the take out of long and shorts. For you own thinking, cotton is a yearly weather related crop which is easily moved and stored. Unlike the current rice production situation, cotton does not have critical impact on feeding populations. Unlike oil, cotton has no limits on how much can be grown or stored in a good year creating a large product pool to draw from. Also, looking at the gaps in the current cotton chart, one can see the potential for loosing in a big way.

Chartingyourfutures.com is a nice daily, quick read of many of the commodities.

Commodities have always been a big boys game even before computers and synthetic investments/bets.

For the little guy it is fools game, IMO.

Sat, 10/02/2010 - 12:09 | 620869 Grand Supercycle

Updated GOLD monthly chart:

http://stockmarket618.wordpress.com

Sat, 10/02/2010 - 11:46 | 620826 covert

time to enslave the excess muslim population to make up for falling buildings and cotton shortages.

http://covert2.wordpress.com

Sat, 10/02/2010 - 11:34 | 620812 fireangelmaverick

MHFT you are a fucking retard.

Here look at your timing in this.

http://www.zerohedge.com/article/time-add-some-corn-your-diet

As I had told you then,

you are too late to the party. You came a week before the final top in Corn, in cotton I think you have already come after it. It might be helpful if tyou actually picked something BEFORE it went up.

Sat, 10/02/2010 - 12:10 | 620871 Strongbad

Did you forget to read the title? "My big miss.."?

Sat, 10/02/2010 - 11:45 | 620827 Landrew

What part of "My big miss" did you not understand? I think people who admit they missed something are worth listening to. Admitting a mistake or omission is very honorable!

Sat, 10/02/2010 - 14:12 | 621056 patience...

I've missed a lot of things in my life too, but I don't feel compelled to blog about it.

Sat, 10/02/2010 - 11:57 | 620843 Kayman

Landrew

I concur. Admitting you're human is in scarce supply.

Sat, 10/02/2010 - 15:53 | 621106 ToNYC

You might give credit to the lesser humans for the honesty so declared in not measuring up.

Sat, 10/02/2010 - 11:40 | 620821 El Hosel

"MHFT you are a fucking retard".

Nicely said.

Sat, 10/02/2010 - 11:50 | 620834 ISEEIT

I see the guy as a scammer. He may or may not realize that he is just a leach on a rotting corpse, but in either case he does represent something gross.

Sat, 10/02/2010 - 11:26 | 620804 Clint Liquor

Don't they use cotton to make FRNs?

Could Ben 'let them eat credit' Bernanke's money printing be impacting supply?

Sat, 10/02/2010 - 14:52 | 621085 DosZap

"Don't they use cotton to make FRNs?"

No, they use polyester leisure suits from the 70's,those dudes are Cheeeep now..........(<:

Also it holds the RFD's better.

In answer to your honest question, yes along with other shit you don't know about.

Sat, 10/02/2010 - 09:00 | 620671 BeerGoggles

Commercials are still short cotton. Probably time to short it.

My Big Miss in Cotton

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