Cotton has become an important substance in our daily lives. Known for its versatility and natural comfort, it is harnessed in order to produce clothes and homewares as well as products for industrial purposes.
Cotton, truly, has its smooth and soft side, which can offer people the best of both worlds.
Soft but Strong
Cotton may be soft in nature but it has strong performance and is essential to every population in the world. The fiber derived from the cotton tree can be woven on knitted into fabrics and eventually can be turned into textile products such as t-shirts, socks and underwear. This useful substance is also an essential element in making fishnets and book binding and archival paper.
Truly, this soft commodity is a total package and can cater people a number of purposes. Its seeds are utilized as feds for livestock animals such as cattle and cows. These seeds are extracted to make oil out of it which can be transformed into products such as soap, margarine and emulsifiers.
With this plenty of benefits that cotton can give, the demand for it has been always up high, with the Africa, Americas and India supplying the necessary numbers across the world.
Due to the strong demand for cotton, it can now also be profited through an investment. This is a perfect option for investors who desire smooth overall portfolio volatility because of its slight correlation to both stocks and bonds. Furthermore, it has hedging potentials against inflationary pressures due to its wide use in the textile industries
Cotton can be invested in futures contracts, exchange trade fund and even in stocks, although markets are not as large as other commodity-linked markets.
Like other commodities, cotton is listed in the New York Mercantile Exchange but is more available in European Exchange as European investors have more exposure with the commodity. It is also available in the US markets including the iPath Dow Jones-UBS Cotton Total Return EBL, an index comprising of cotton futures contracts and is traded normally in the months of March, May, July, October and December cycle for the next 24 months.