Cotton futures surge to a decade high

Cotton futures (Dec 21) have reached a decade high at $1.16 per pound, a sign clothes may become more expensive. According to Cotton Inc., over 75% of the world's clothing contains at least some amount of cotton, including T-shits and jeans.

Prices have risen by 14% in September and more than 40% year-to-date as result of shortages and shipping delays caused by COVID-19 shutdowns in the supply chain as well as the impact of extreme weather on crops in the U.S and India paired with a rise of demand by retail shoppers since the pandemic started.

In addition to these factors, Chinese manufacturers are still forced import U.S cotton rather than using their own due to a decision made by Trump's administration last December to block U.S companies from importing cotton and cotton products coming from China’s Western Xinjiang region over suspicions it was being produced using forced labor by the Uyghur ethnic group. The decision, which remained in place under Biden's administration continues to add more pressure on the supply side. 

Investors can easily access the cotton markets through WisdomTree Cotton ETC (COTN). The fund invests in Cotton Futures by tracking the Bloomberg Cotton Subindex, and trades on the Deutsche Börse Xetra, London Stock Exchange and Borsa Italiana. Year-to-date, COTN has gained more than 36%.

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