The Fundamentals of Cotton Trading

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Cotton is am important fiber which has many daily uses. This is a natural fiber obtained from cotton plant. Cotton is used in the production of clothing, medical uses and for home furnishings. Cotton in bulk quantities is bought by cotton weaving mills to convert it in to yarns and then it is sold to textile mills for the production of various types of clothes and towels. The trading of cotton occurs through out the year and the rate of cotton also keep on changing like other commodities traded in the market. The rate of cotton futures usually go up during the summer moths that is from March to July. The rates will touch the bottom from September to November.

China is the world’s largest producer of cotton. In United States the highest producer of cotton is the Texas state. the people who are interested to invest in commodity trading of cotton can get the information regarding the world price of cotton, crop conditions, export sales report etc from the weekly market review of cotton published by the USDA. Since the cotton production in U.S is based mainly on the Mississippi delta, the extreme climatic conditions here will affect the market rate of cotton. The market rate of cotton also depends on the production of cotton in China and India. If their production decreases the importing decreases and this will cause an increase in demand and hence high price.

At present the rate of cotton is very low. This is because of the cancellations of export orders. When cancelations exceed the sales the rates are subject to a drop. According to commodity market report the rates of cotton has fallen considerably from its peak rates in March 2011. So, at present investing in the cotton as a commodity is not advisable. The rate of cotton was $117.33 during March this year but has reached as low as $64 in July. The demand for cotton is decreasing in the export market this keeps the rates down. It is estimated that the cotton demand for the current year in the global market is less by 1.7 % than what was expected.

This year cotton price was really fluctuating but many traders who were trading metal have shifted to cotton trading. One cannot give the correct predictions on cotton prices at the present situation. So before making an investment in cotton make a thorough study of the market movement. Gets an idea about the climatic conditions in the major cotton producing areas in U.S drought as well as floods causes the rates to go up? Get information about the production of cotton in India and China if they have surplus amount in their country the export will be affected and that will reduce the price. Read the weekly reviews about cotton trading and related topics. Make an analysis of the information and according to it make the investment in cotton. It is expected that the price of cotton will move up by the end of the year.