Cotton Soars to New Records as Chinese Demand Surges

Chinese imports rose an astounding 86% in 2010 with record demand from the textile sector and a diminished cotton crop due to weather issues. Cotton settled at an all time high of nearly $1.62 a pound, climbing 11% in the past week (compare to last years price of $.52/lb). The US Dept of Agriculture reduced its estimated output while also increasing its estimated consumption forecast. The same held true with Indias Southern India Mills Association , which reported a reduction in production and increases in consumption estimates. Global inventories are at the weakest seen since 1995-1996, and hoarding is becoming prevelant with speculators.

PLAN AHEAD- Procure inventory now!

Yesterday, I ordered more yarn to replenish inventories. To my chagrin, I fond prices have escalated yet another 18% since last months purchases. I spoke with several people close to the supply chain and all are concerned about outages late in the third quarter. It is also expected that prices will continue to escalate. Although Style Source does run a stock inventory position the cost of that inventory has risen close to 70%. This means that capitalization of inventory and carrying costs have risen accordingly. Although it makes some sense to increase inventory position in greige goods to ameliorate the possible shortages later in the year we must watch our spending and where cash is tied up to insure liquidity. Thus, we are HIGHLY recommending to our customers they consider funding dedicated greige goods inventories as insurance for supply for the second half of 2011. We will strive to maintain a strong stock position in all fabrics, but all it takes are several larger unplanned orders to create a short term shortage that may take much longer to replenish. We are all in this together, and, as yor supplier and partner, are doing all we can to communicate the urgency of this situation. Google some articles on "cotton shortage" or cotton fiber prices" to educate yourself and make decisions that will insure your success in 2011!

Cotton Yarn Costs Continue to Increase- Now its Australia!

Although cotton fiber prices appeared to have plateaued last month the ongoing concerns over availability have forced prices ever higher. The floods in Australia have wiped out their crop, and India put a freeze on exports at the end of 2010 and has yet to lift it. To give you an idea on how prices have changed, we were paying $1.77 a pound for 30/1 combed ring spun yarn last year. Four months ago we were paying $2.35, last month we paid $2.70, and today I was quoted $2.95. That is a 67% increase. Yarn makes up about 65% of fabric cost and fabric cost makes up about 45-55% of a garments cost (variability due to the vast differences in labor between garment types). Another example is a basic 18/1 100% cotton open end yarn. Last year $1.00/lb, now $1.95/lb., a 95% increase. Our current surcharge on catalog pricing is 10%. For custom programs that have repeat styles from last year we are recosting as orders are placed. We highly recommend you inquire about the impact on your pricing while planning your coming season.

Cotton Likely to Remain Scarce/Synthetics Surging in Price

I recently spoke with one of the most prominant people in the cotton fiber industry. He helped me understand the environment today. With the worldwide shortage there is a great need to increase plantings of cotton fiber. Unfortunately, other crops like wheat, soybeans and corn command higher dollars per acre than cotton. With the lack of availability of additional acreage the industry must focus on increasing the yield per acre. There is no slow down in growth in India and China, and even with increased yields it is projected we will continue to experience shortages for at least several years. In the meantime, with ever rising petroleum costs, synthetics are enjoying their own dramatic upward climb in prices. The only caveat to the negative news is the realization that clothing has never been cheaper in real dollars. In 1910 it took a man 50 hours of labor to afford a new suit. By 1940 that increased to 90 hours. Today, at an average wage of $20 an hour a $300 suit costs only 15 hours of labor. In that context, clothing has never been cheaper.