Polyester Prices Surge on New Demand- Cotton May Have Peaked?

Recent news from China has all petroleum based fibers, especially PET, polyester, nylon and urethanes, increasing in price from 20-45% over the past two months due to increased demand and rising petroleum costs.

In the meantime, cotton may have peaked, as recent signs of a drop off in pricing could be either a telling sign of an eventual return to normalcy or a hiccup in the forward trend. Regardless, cotton bought at all time highs is in process or in the field and it will take many months for it to be converted to apparel and reach market, so we are facing serious price increases in apparel for spring and fall seasons of 2011. A new article on Bloomberg can be read here www.bloomberg.com/news/2010-11-16/gap-wal-mart-clothing-suppliers-raise-prices-on-terrifying-cotton-costs.html

The end of the world as we know it?

Seems that way! Every day we look at cotton fiber prices and say there is no way benchmark pricing can increase further, Last year cotton was $.55 a pound, today it is $1.52 a pound, a 276% increase. The Chinese have been buying futures as high as $2 a pound. Compounding the cotton issue is the increases in polyester fiber, up 25% from a year ago, and trending upward at a faster pace as some programs switch to higher polyester blends in attempts to stave off the cotton increase. Invariably, profit taking will add to the drama. Further exacerbating issues on the import side is government money printing, causing the dollar to slide against foreign currencies and increasing the cost of imported apparel products.

What can you do? Educate your customers by sending them links to articles or to this blog. The more retailers hear of the impending increases the more likely acceptance will come. Discuss the historic rise in costs at dinner parties or social events, creating more awareness. Start planning. Develop next years budget anticipating apparel increases in the range of 6-10%. Consider forecasting, as it will become the most important tool you will use to remain in stock. Manufacturers are not mind readers, and with inventories now more costly than ever, controls will likely tighten up availability.

Read the previous blogs to gain a history of what has transpired and please consider the importance of your level of communication with your suppliers.

Cotton Market Goes Crazy

The latest headline in Textile World magazine says "The cotton market goes crazy". I would call it insane. Prices on yarn quoted to me last week are up yet another 15%. Prices from 2 months ago are up nearly 35%. I received a quotation from a mill on a cotton fabric two days ago with a bold statement "Quotation good for two days only". I placed the order today, and the mill owner begged me to allow him another $.12 a yard, as the price had gone up in the past day. I held him to his quotation, and he is now modifying his disclaimer to read "quotation good for the day of quotation only.

I'm not sure where the deflation concerns are coming from, as yesterday I received price increase notifications that UPS will raise rates 4.7% next year and our snap supplier just raised prices 6.5%. On the sewing side, cotton thread is experiencing the same issues as yarns.

Experts are stating that world supply will be 3 million bales short this year. China is the main concern, for they are consuming at an expansive rate and if they heat up further pressures will be that much greater. The article also states that prices have not been higher since 1870, when civil war caused blockades in the north and cotton could not get through. A weakened dollar rounds out the picture of misery.

I cannot urge you strongly enough to anticipate first quarter needs and attempt to provide us with forecasts. We cannot invest all of our working capital on speculation inventories, as we handle so many fabrics and programs we would never be able to cover everyone. Open a conversation with us so we may work through how best to position you for the first quarter of next year.