For the past months the textile industry has been rocked by skyrocketing prices for cotton. Bloomberg News reported that cotton futures in New York have surged 71% this year as the global supply struggled to meet demand, resulting in a record high for cotton prices last week. The problem has been felt accutely by American textile mills as the cost of cotton yarn has forced them to pass some of that cost onto fabric retailers. Retailers have also felt obligated to raise the prices at which they sell the mills’ fabrics. Ultimately, consumers for cotton novelty and dress fabrics have been paying more than ever for the fabrics they need. Even powerful retailers such as Gap, J.C. Penney and Wal-Mart have felt the effects of soaring cotton prices.
The impact of high cotton prices has been felt much father afield than just the United States. The Hindu Business Line reported that India’s $63 billion apparel industry will shut down operations on Thursday, November 18 in protest against the steep rise in cotton yarn prices. According to Bloomberg News, a representative of one Chinese clothes maker called dealing with cotton suppliers “terrifying”.
Why are cotton prices on the rise?
The engine behind rising prices for cotton can be found in China, where the production of cotton is estimated to not meet demand for the 12th straight year. This development cuts into the country’s dwindling stockpile. The China Cotton Association reports that from 2009 to 2010 demand outpaced production of the fiber by 3.6 million metric tons. In the year that began August first, some authorities predict that production may lag behind demand by 17 million bales. The situation is such that some Chinese apparel manufacturers are giving pricing to clients on a weekly basis.
Furthermore, cotton stockpiles were low because of weak demand during the recession. The past summer’s cotton crop was also hit by flooding in Pakistan, as well as because of poor weather in India and China.
How long will the situation last?
How long will cotton prices impact retailers and consumers? An article in the New York Times quoted a cotton analyst for First Capital Group who surmised that cotton production is unlikely to catch up with consumption for at least two years.
It appears that the high cost of cotton will not abate for some time. In the meantime many mills and manufacturers are looking for solutions to keep prices down. A number of apparel manufacturers have moved their operations to countries where wages are lower or where customs charges are less. Other manufacturers are looking to incorporate synthetic fibers into their products.
What remains to be seen is if cotton prices begin to stabilize. Also of importance is how much consumers are willing to pay for cotton goods. Could consumers become more willing to accept synthetic fibers? If so, could cotton’s market share be hurt in the long run?
Keep checking back at J&O Fabric Stores Blog to learn more about the state of textiles in the world and how they effect you. At J&O we are always on the lookout for ways to keep our prices low and will continue to do so.
