MNeagle
9th September 2010, 10:12 AM
posted about this last month, worth a repeat look (& stock up!!)
Cotton shortage = Pricey T-shirts and jeans
NEW YORK (CNNMoney.com) -- Attention T-shirt fans: Bag those deep discounts now because come January, stores could have you paying more for your favorite clothing.
The reason: Cotton prices have nearly doubled this year, hitting a near 15-year high following a chain of events among major Asian cotton producers that has choked off global supply.
The price of raw cotton reached 90 cents a pound this year, up from the 40 or 50 cent average, said Mark Messura, an economist and vice president with Cotton Incorporated.
Cotton domino effect: First, a drought in China, the world's largest cotton producer and consumer, damaged crops there and forced the nation to ramp up cotton imports to make up for the shortfall.
Meanwhile, the world's second-biggest cotton producer, India, restricted its exports to protect domestic supplies and prices.
At the same time, Pakistan, another major cotton producer, was hit by devastating floods, further exacerbating the cotton shortage and boosting raw cotton prices even higher.
The impact on your wallet: Facing soaring prices, analysts say textile makers and clothing retailers such as Wal-Mart (WMT, Fortune 500), J.C. Penney (JCP, Fortune 500) and Gap Inc., who source a significant quantity of cotton clothing in China and elsewhere in Asia may have to pass along higher costs to consumers.
"Add $2 to that $12 T-shirt next year," said Ilse Metchek, president of the California Fashion Association, a non-profit group representing the state's apparel and textile industry. And prices could be even higher than that if businesses also factor in higher labor costs overseas, she said.
Wal-Mart and J.C. Penney declined to comment on the story. Gap Inc (GPS, Fortune 500)., the No. 1 clothing chain, did not respond to requests for comment.
Better buy now: Typically there's a four to six month lag time in the order-to-production cycle. Therefore, the most recent jump in cotton prices will be factored into merchandise hitting stores after Christmas.
VF Corp., whose brands include Lee, Nautica and Wrangler, recently indicated that the company may have to increase product prices, citing raw material and labor costs in China.
Between a rock and a hard place: "It's a bit of a double whammy for the U.S. apparel industry," said Messura. Cotton prices had been ticking up before the recession, but stopped climbing as consumers reduced their clothing purchases.
Now a modest pick up in shopping activity has increased demand for cotton at the same time that raw cotton is in short supply.
"We're in for a very interesting situation in the next few months," said Messura "On the one hand, retailers don't want to raise prices for fear of losing store sales. So they are still discounting. But rising raw material costs are also squeezing their business costs."
Eric Wiseman, CEO of VF, echoed Messura's thoughts during the company's second quarter earnings call in late July
"Cost inflation is really more of a question for us in 2011. Total apparel imports this June were 30% higher than last June, and capacity has not yet caught up," Wiseman said. "In terms of fabric, prices could be up a few percentage points next year with cotton, the biggest driver for us given our large Jeanswear business."
"Clearly, price increases will be part of the formula for protecting our gross margins in 2011," Wiseman said.
Polyester ready for a comeback: Although the price surge is hurting his business, Anderson Warlick, president and CEO of Parkdale Mills, one of the nation's largest users of cotton, whose clients include Hanes, Fruit of the Loom and Vanity Fair brands, said American cotton farmers are relishing the price boom. "Acreage is up dramatically in the United States and I expect farmers will plant more cotton if these prices hold," he said.
However, more than 80% of cotton grown in the United States is exported.
So come January, besides paying more for cottonwear, there may be one more side effect for consumers - the comeback of polyester. Or rather, poly-cotton.
"If someone was making 100% cotton T-shirts and jeans, expect them to switch to a 50% poly-cotton blended fabric," said Metchek. "It will happen, but I'm not sure how much."
http://money.cnn.com/2010/09/09/news/economy/cotton_shortage_could_inflate_clothing_prices/index.htm?cnn=yes&hpt=T2
Cotton shortage = Pricey T-shirts and jeans
NEW YORK (CNNMoney.com) -- Attention T-shirt fans: Bag those deep discounts now because come January, stores could have you paying more for your favorite clothing.
The reason: Cotton prices have nearly doubled this year, hitting a near 15-year high following a chain of events among major Asian cotton producers that has choked off global supply.
The price of raw cotton reached 90 cents a pound this year, up from the 40 or 50 cent average, said Mark Messura, an economist and vice president with Cotton Incorporated.
Cotton domino effect: First, a drought in China, the world's largest cotton producer and consumer, damaged crops there and forced the nation to ramp up cotton imports to make up for the shortfall.
Meanwhile, the world's second-biggest cotton producer, India, restricted its exports to protect domestic supplies and prices.
At the same time, Pakistan, another major cotton producer, was hit by devastating floods, further exacerbating the cotton shortage and boosting raw cotton prices even higher.
The impact on your wallet: Facing soaring prices, analysts say textile makers and clothing retailers such as Wal-Mart (WMT, Fortune 500), J.C. Penney (JCP, Fortune 500) and Gap Inc., who source a significant quantity of cotton clothing in China and elsewhere in Asia may have to pass along higher costs to consumers.
"Add $2 to that $12 T-shirt next year," said Ilse Metchek, president of the California Fashion Association, a non-profit group representing the state's apparel and textile industry. And prices could be even higher than that if businesses also factor in higher labor costs overseas, she said.
Wal-Mart and J.C. Penney declined to comment on the story. Gap Inc (GPS, Fortune 500)., the No. 1 clothing chain, did not respond to requests for comment.
Better buy now: Typically there's a four to six month lag time in the order-to-production cycle. Therefore, the most recent jump in cotton prices will be factored into merchandise hitting stores after Christmas.
VF Corp., whose brands include Lee, Nautica and Wrangler, recently indicated that the company may have to increase product prices, citing raw material and labor costs in China.
Between a rock and a hard place: "It's a bit of a double whammy for the U.S. apparel industry," said Messura. Cotton prices had been ticking up before the recession, but stopped climbing as consumers reduced their clothing purchases.
Now a modest pick up in shopping activity has increased demand for cotton at the same time that raw cotton is in short supply.
"We're in for a very interesting situation in the next few months," said Messura "On the one hand, retailers don't want to raise prices for fear of losing store sales. So they are still discounting. But rising raw material costs are also squeezing their business costs."
Eric Wiseman, CEO of VF, echoed Messura's thoughts during the company's second quarter earnings call in late July
"Cost inflation is really more of a question for us in 2011. Total apparel imports this June were 30% higher than last June, and capacity has not yet caught up," Wiseman said. "In terms of fabric, prices could be up a few percentage points next year with cotton, the biggest driver for us given our large Jeanswear business."
"Clearly, price increases will be part of the formula for protecting our gross margins in 2011," Wiseman said.
Polyester ready for a comeback: Although the price surge is hurting his business, Anderson Warlick, president and CEO of Parkdale Mills, one of the nation's largest users of cotton, whose clients include Hanes, Fruit of the Loom and Vanity Fair brands, said American cotton farmers are relishing the price boom. "Acreage is up dramatically in the United States and I expect farmers will plant more cotton if these prices hold," he said.
However, more than 80% of cotton grown in the United States is exported.
So come January, besides paying more for cottonwear, there may be one more side effect for consumers - the comeback of polyester. Or rather, poly-cotton.
"If someone was making 100% cotton T-shirts and jeans, expect them to switch to a 50% poly-cotton blended fabric," said Metchek. "It will happen, but I'm not sure how much."
http://money.cnn.com/2010/09/09/news/economy/cotton_shortage_could_inflate_clothing_prices/index.htm?cnn=yes&hpt=T2