How to invest in cotton stocks

If you’d like exposure to cotton markets without delving into futures and options contracts, a handful of cotton ETNs and cotton-related stocks are available.

If you’d like exposure to cotton markets without delving into futures and options contracts, a handful of cotton ETNs and cotton-related stocks are available.

Cotton ETFs and ETNs

star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small  iPath Dow Jones-UBS Cotton Subindex Total Return ETN (NYSE:BAL) BAL tracks cotton near-month cotton futures. When an existing contracts nears expiry, it’s rolled into a new contract. BAL provides a pure play on cotton market prices, although – as an ETN – it’s actually a debt instrument issued by Barclays PLC (NYSE:BCS).

star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small  ETFs Commodity Securities Limited ETFs Cotton (LON:COTN) Designed to track the DJ-UBS Cotton Sub-Index on a total return basis, COTN is invests in cotton futures contracts. COTN trades on the London Stock Exchange.

star-icon-smallstar-icon-smallstar-icon-small  iPath Dow Jones-UBS Softs Subindex Total Return ETN (NYSE:JJS) JJS invests in futures contracts for coffee, sugar and cotton. As of Feb. 28, 2011, the ETN allocated 31.15 percent of its holdings to cotton futures, 31.60 percent to coffee and 37.26 percent to sugar.

star-icon-smallstar-icon-small  UBS E-Tracs DJ-UBS Commodity Index Total Return (NYSE:DJCI) Comprised of a basket of 19 commodity futures contracts, DJCI holdings include contracts in the energy, precious metals, industrial metals, grains, softs and livestock sectors. As of January 2010, 2 percent of the note’s holdings were in cotton. Crude oil is the note’s single largest holding at 14 percent.

Cotton Stocks and Related Companies

star-icon-smallstar-icon-small  Deere & Company (NYSE:DE) As a leading manufacturer of farming equipment including cotton and sugarcane harvesters, Deere & Company generally benefits from rising prices for crops and food. Farmers are apt to make equipment investments and upgrades as they seek out ways to increase their productivity.

star-icon-smallstar-icon-smallstar-icon-small  Potash Corp. (NYSE:POT) One of the world’s largest integrated fertilizer producers, Potash operates five potash mines in Saskatchewan and one in New Brunswick. As demand for crops rises, so, too, does demand and prices for fertilizer.

star-icon-smallstar-icon-smallstar-icon-small  The Mosaic Company (NYSE:MOS) With a market cap of $38.15 billion, The Mosaic Company is considerably smaller than Potash Corp., but it’s still one of the one of the world’s largest fertilizer producers.

star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small  Namoi Cotton Co-operative Ltd. (ASX:NAM) Trading on the Australian Securities Exchange, the Namoi Cotton Co-operative sells cotton to many of the world’s major cotton processing markets. Namoi Cotton gins approximately 25-30% of the Australian crop each year.

star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small  Olam International (PINK:OLMIF) A global agricultural company, Olam International has a cotton supply network of over 100,000 farmers, ginners and suppliers. The company acquired Australia’s Queensland Cotton in 2007. The company also produces coffee, sugar, rice and other consumer staples.

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