Glencore Xstrata Plc, a Switzerland-based multinational commodity trading and mining corporation, would be shelling out US $150 million for its bid to at least half of U.S. cotton exchange shares. This is the company's biggest investment into fiber after it lost US $300 million in the unstable market three years back.
The company would be taking around 400,000 bales of cotton, in what appears to be the biggest release for a July contract in almost five years, a Reuters report stated.
The transaction takes away from the market at least half of the certified stocks exchange, which could possibly raise concerns regarding the diminishing U.S. supplies plus a small U.S. crop because of the shortage in the upcoming 2013-2014 season beginning August 1.
Atlantic Capital Advisors' Nick Gentile stated that "firework" may occur in the event the near-term supplies continue to stiffen.
The deal may not be Glencore's first venture into the exchange stocks yet its presence is still important because bigger players such as Cargill and Louis Dreyfus have superior presence in cotton. Smaller players are less likely to take delivery since it necessitates big investment, immense storage as well as logistics operations.
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