Cotton is not only the most widely used fabric in the world but also considered to be an affordable option by many. But things are all set to change now as high cotton prices are stirring up the clothes market across the world, signaling higher costs for makers of T-shirts and other apparel.
According to a report published by Bloomberg, heavy rains are threatening crops in major U.S. growing regions including Texas and the Mississippi Delta, according to Maxar Technologies Inc.’ senior meteorologist Donald Keeney. The U.S. is the world’s biggest cotton exporter. At the same time, overseas shipments are flowing with demand rising in China, the top user, and buyers like Turkey and Pakistan are looking for product as well.
"Futures are on a tear, nearly touching $1 a pound, a level not seen since 2011. The higher prices mean that the costs to make clothing are on the rise, which retailers may try to pass to consumers. In the U.S. at least, that will be difficult, with discretionary spending constrained by the pandemic and stagnant wages, said Peter Egli, the Chicago-based director for Plexus Cotton Ltd. Higher clothing prices may curb demand," the report claims.
The rising futures are also catching some traders with substantial short positions on ICE U.S. exchange, pushing up prices even more.
In the shorter term, shipping constraints are also helping cotton’s rally. The U.S. had a small crop last year, and “it is not easy to get cotton to mills in short order,” Jon Devine, economist for North Carolina-based researcher Cotton Inc told Bloomberg.
China has been buying more American supplies recent weeks and the “raw-fiber equivalence of cotton estimated to be contained in U.S. apparel imports has been occurring at the highest rate since the 2010-11 price spike” when futures reached record highs, he added.