Indias Cotton Export Restrictions Being Challenged

Textile World magazine just published an article dicsussing Indias export restrictions on cotton. You can read it at www.textileworld.com/articles/2010/October/Indiaxs_Cotton.html . It discusses how every major trade organization is protesting Indias new export policy on cotton fiber and yarns. They are restricting export to keep domestic prices in India low, and selling off the bulk of their finer to China, who has subsidies in place to buffer the higher costs, giving both China and India unfair trade advantage in the worldwide marketplace. As the second largest cotton fiber producer, Indias policies have a major impact on worldwide supply and pricing. Additionally, large state owned textile operations in China are buying up fiber at any price, causing deep concerns in the USA about supply and ever escalating prices.

Cotton Crisis Escalates-No end in Sight!

A recent announcement from India states that the 5.5million bales allocated for export for all of 2011 have been booked and registered in the first 10 days of release. Heavy booking from China subsequent to the Chinese holidays combined with domestic demand are forcing prices ever higher. Current cotton pricing is nearing $1.20 a pound (bear in mind that a year ago it was at $.55 a pound). Fears in India are of limited to no availability of cotton fiber for their domestic market in the first quarter. This bodes poorly for our market, as exported fiber and yarns from the major producing countries are diverted to their own markets or bid up in the Asian market. Forecasts for domestic pricing are an additional increase of 20-30% by January. We have experienced increases of nearly 10% in just the past three weeks!

Style Source Inc has increased its position in yarn inventories, for our basic fabrics, in the past months in an attempt to buffer and delay any price increases. Our current 4% surcharge on published pricing and booked programs will likely hold until 2011. It appears inevitable we will have to increase the surcharge as we deplete existing inventories. Any re-orders on custom styles costed prior to September of 2010 will require re-costing.

Conversations with many knowledgeable business leaders indicate the first quarter of 2011 will bring us delayed deliveries and shortfalls. Availability will be an issue. We strongly urge our customers to consider bulking up inventories by December to avoid any dramatic delays. We realize this will mean additional investment , but better to have the goods on the floor than to be unable to meet deliveries. Anticipate an additional 3-4 weeks of lead time for orders placed on custom goods after January, and plan accordingly.