How do you go about investing in cotton?
Four ways I am aware of:
#1) Buy cotton futures. Right now cotton is experiencing backwardation - meaning the current month expiration is trading at $172 while the Sept 2012 (for example) expiration is at $93. This is due to the expectation of much larger crop in the future.
#2) Buy a stock fund, symbol BAL. This is basically the same as option #1 - but there are fund managers who trade the futures for you - and take a cut (profit or no profit.)
#3) Buy a cotton producer. Only one I am aware of is BWEL.pk - JG Boswell Co. It is a farming giant that owns 100,000 acres in California (tomato and cotton)
#4) Grow it yourself. Become a farmer.
Of the above, I wouldn’t recommend #1 since the futures are a net sum zero business - and actually net loser counting commissions. #2 is also a longterm loser of an idea due to fees. #3) is probably safe - but the company is a pink sheet stock which scares a lot of people off. It is a real company worth nearly a billion - but semi-private.
That leaves #4. Probably the hardest to do - yet the only safe option since the farmers are the only people who can be certain of profits in cotton longterm.
Thank you for such a complete answer! I must add you!
I would like to know your resources for your investments’ decisions. Who do you listen to? What do you read?
Spread the knowledge!!
The best person I would feel comfortable recommending for investment advice is Marc Faber.
He is the author of the Doom, Gloom, & Boom Report along with the website by the same name. I think he charges about $200 a year for a subscription, but don’t bother with that.
Just go to Youtube. He’ss a regular on all the English speaking investment channels and there are lots and lots of his videos uploaded there. He’ss very open about his investment advice and if you listen enough you will learn a lot from him. Just make sure you spell the name correctly - Marc Faber. (There is a Mark Faber from CNBC running around also.) You want Marc.
Jim Rogers is also good to listen to - but Marc Faber is my fave.
I’d like to add just one thing to the Egg’s excellent replies. Trends are very positive for cotton right now. China’s demand, which contracted during 2008 and 2009, is now increasing again, though it’s still far from 2006 and 2007. In the meantime China’s internal production is strongly declining due to shifts in their agricultural policy: while in previous years it covered three quarters of the internal demand, this year it’s projected to cover about 60%. Producers in the US, Brazil and Australia are expected to increase output to cover this deficit, mostly because this is translating into very good prices. Bangladesh, Turkey, Indonesia and Thailand demand for cotton is also expected to remain very good. The US, being by far the first exporter, stands to gain from this situation.
What do you guys think of NYSE:AGRO?
That’s Adeocoagro, one of South America giant energy and agricultural conglomerates. It’s based in Luxembourg and backed by George Soros. They have extensive business in Brazil, Argentina and Uruguay producing sugarcane, milk, rice, soybeans, coffee etc. They own sugar mills and ethanol plants. Shareholders include George Soros and Qatar Holdings. On the paper it’s a winner.
But there are three issues with it. The first is stocks have been priced quite high for what is really a newcomer to the NYSE. The second is there isn’t really much clarity about future earnings at the moment. The third, and most critical, is the issue of foreign ownership of Brazilian farmland. Adecoagro is to all effects a foreign company and subject to the whims of local politicians.
My advice would be not to buy right now but to keep a close eye on it. Opportunistic purchases may make you some good money.
What do you think of goldmoney, kakugo? Do you trust it? What else would you consider buying right now and how would you do it? Oh, by the way, that Japanese investor is amazing!