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Cotton

Forget gold: this season's must-have commodity is cotton

Could the rising price of cotton mean the end of cheap clothes in Penneys? Well, probably not.

AMID ALL THE TALK of gold continually reaching record high values on the world’s commodity markets, there’s also been massive activity on a slightly more low-profile one this week: cotton.

The price of raw cotton dipped below $1/lb yesterday, closing down for the first time in five days after investors – shuddering at investment in more traditional stocks or commodities amid growing uncertainty about the American recovery – lumped for more traditional assets.

It had, however, hit the highest price in 15 years over the course of the day, at one point hitting $1.0334 per pound – leading to fears that the era of cheap clothing at high street stores like Penneys could end.

It’s thought, however, that the spike has been helped by the flooding in Pakistan and China this summer, which has massively hit the world’s cotton stocks. The continued expansion of economies like those of China and India have stimulated demand for the fabric too.

The price of cotton summaries has grown steadily in the last two months. Pic: Bloomberg.

Investors believe, however, that the rally in prices is set to slow down with the flow of lint in cotton markets across India beginning to pick up, which will help to increase supply.

The weather in India is also expected to help a bumper crop, with production up by over 10% to 32.5 million bales there this year.

Prices this morning in early trading had fallen a further 1% to 97.3 US cents per pound. The era of cheap underwear lives on.