Record cotton inventories spell bad news for bullish bets

There’s enough cotton sitting in global warehouses to make more than 127 billion T-shirts, or 17 for each person on the planet. That’s bad news for investors betting prices will rise.

World inventories at the end of this season will be the second-largest ever, just slightly less than last year’s record, according to a US Department of Agriculture forecast last week. Hedge funds raised their bullish cotton bets to the highest in more than a year, only to face the first weekly price drop since early November.

China, the world’s largest user, is curbing cotton imports by more than 30 per cent, helping to shrink global trade for a fourth-straight year, the International Cotton Advisory Committee estimates.



Fiona Boal, London-based director of commodity research at Fulcrum Asset Management, said: “To get excited about the cotton market, we will need to see either a weather event or something else that really changes the Northern Hemisphere mind about growing cotton. Otherwise, it’s hard to see prices move substantially higher.” Money managers boosted the net-long position in cotton futures and options by 26 per cent to 60,357 contracts in the week ended December 8, according to US Commodity Futures Trading Commission data.