Cotton cycles …

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I see (www.cotlook.com) cotton prices have hit a 2½ year high on fears that the Pakistan floods will cut supply – the country produces nearly 7% of world supply. The dynamics of this are pretty easy to lay out, just like many other cyclical industries:

  • The total of industry current capacity [a resource] determines maximum output
  • … which balanced against current demand determines price through normal elasticity mechanisms.
  • If prices rise, so do supplier-profits – and crucially, so do expected profits [an ...
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