Cotton prices have broken through the US$1 per pound barrier for only the second time in history amid escalating worries of a potential global shortage.
Cotton futures set for December delivery have soared by as much as 30% since July, reaching their highest level since 1995.
The rising prices have come as a result of a combination of factors, most notably supply issues caused by the floods in Pakistan, plus heavy rain potentially reducing the crop in China.
The situation has been worsened by doubts surrounding the ending of restrictions on exporting raw cotton from India, which are due to be lifted on 1 October – a step opposed by many domestic textile and apparel companies.
Now investors and hedge funds are also being drawn into the cotton futures market by the rising prices and increases in shipments to key production centres like China and Mexico, sending prices up even further.
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By GlobalData
