Page 30 - MEX-Yearbook-2017

Commodity Insights

Cotton

Introduction Cotton has historically exhibited a very low correlation to both stocks and
Cotton is a type of flowering plant that belongs to the mallow family. bonds, making it a potentially appealing option for investors looking to
Cultivation of cotton started approximately 7000 years ago in Mexico smooth overall portfolio volatility. Since it is widely used in textiles, it also
(New world) and in India and Pakistan (Old world). Out of roughly 43 has the potential to hedge against inflationary pressures.
species of cotton, only four are cultivated on a large scale. Cotton grows
in tropical and subtropical parts of Asia, Africa, Australia and America. Fundamental Facts
People cultivate cotton because of the seed that represent valuable source • The state of harvest in the leading producing countries: namely China,
of fibers and oil. Each year, around 25 million tons of cotton are produced
in the 70 countries around the world. India and the USA.
The word ‘cotton’ is derived from an Arabic word ‘qutun’ or ‘kutun’, • The given shipment of cotton’s quality, giving the premium against the
meaning any fine textile. The plant is native to tropical and subtropical
regions, including the Americas, Africa, and India. Grown extensively in Cotlook A Index (calculated based on the 5 cheapest cotton available in
India for six thousand years, cotton has a very rich history. the Asian market). Cotton is graded by country of origin, staple length,
Cotton is backed with thousands of uses. A large part of the world’s textile fineness, and maturity.
production is cloth made of cotton or blends of cotton and synthetic fibers. • The cost of substitutes: especially wool (decreasing usage) and man-
In addition to this, cotton is used in fishing nets, coffee filters, tents, made fiber (petroleum based -synthetic, and artificial -cellulose based
explosives manufacture, cotton paper, and in bookbinding. The plant’s seed -fibers) which are cheaper.
also provides edible vegetable oil and protein feed.
Cotton is a part of everyday life for almost every population, as this
commodity is used in a wide variety of textile products. Cotton is grown in
a number of regions throughout the world, including the Americas, Africa,
and India.

29 | MEX NEPAL YEAR BOOK 2017