Clients have asked me about the hype surrounding ethanol that has driven corn prices higher. However, I feel there are other commodities that might see a trickle-down impact from this fuel-inspired commodity boom, and I see a good buying opportunity in cotton.

Corn has indeed been in the spotlight last year as the price of energy has soared, and consumers are looking for alternative fuels. The biggest headline lately has been the large run-up in corn prices as the ethanol hype continues to provide support. Given the attractiveness of price, farmers may be shifting to corn production at the expense of other crops this season, which I believe could lead to some interesting buying opportunities in other commodities.

Looking ahead to the March 30, 2007, planting intentions announcement, note that the price of corn has breached $4 per bushel for the first time in more than 10 years, and for the first time ever prior to planting. Thus, many farmers are expected to shift much of their acreage to corn. This should have a large effect on the price of alternative crops, namely soybeans and cotton.

Although I am not completely sold on ethanol being the cure to our nation's dependence on foreign oil, it is hard to place myself in front of the strength of this recent corn rally. I believe that we will see a bit of a correction in corn prices as people realize that the run-up is overdone, but that correction may not come for awhile. Lord Keynes once said, "the market can remain irrational far longer than you or I can remain solvent." I believe this will continue to be the case in the corn market for some time.

Until we do see a significant correction in the price of corn, I feel other commodities could feel the impact of crop shifts this season. I see cotton as an interesting opportunity, as it has room to rally from recent lows, with growing demand potential. China, which has typically been the largest consumer of U.S. cotton, has recently cut back on the amount of cotton it imports from the U.S. It has sought out India and Africa as sources of cotton instead. This has caused the price of cotton in the U.S. to back off a bit since December. Due to lower prices and lower exports, the amount of cotton planted this year could be as low as 12 to 12.5 million acres, as opposed to recent estimates of 13.2 million acres.

However, China's demand is expected to outpace their production by 23 to 24 million bushels, causing it to import the balance to meet demand. The key is where it chooses to import cotton from; will China turn back to the U.S. to meet its needs? My forecast is that we will see higher demand from the Chinese as their economy continues to grow. This, in conjunction with a much lower acreage allocation to cotton, could drive cotton prices higher over the next couple months, in my opinion.

There are a few different ways you as a trader can take advantage of a rally in cotton prices. My bias is toward buying futures, but you can also use call options or bull call spreads. I like to custom-fit all trades, whether options or futures, to each customer depending on risk tolerance. Please give me a call to see how we can maximize the opportunities available to you in this and other markets, such as the metals and energies.

Matt Roma is a Senior Market Strategist at Lind Plus, Lind-Waldock's broker-assisted division. He can be reached at 866-231-7811 or via email at mroma@lind-waldock.com.

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