Cotton Prices Skyrocket
Posted on December 10, 2009 by
NEW YORK-With cotton in low supply throughout the world, cotton futures prices have headed drastically northward in recent months--and appear to be headed even higher in the very near term.
Depending on the month of the contract, cotton futures prices have risen by from 36 percent to 44 percent in the past five months. According to the National Cotton Council of America, cotton futures prices ended yesterday at a range of from 74.42 cents per pound for March 2010 contracts to 78.6 cents per pound for March 2011 contracts. The average cotton futures price in July was 54.71 cents per pound for all contracts, as reported by the Web site Trading Economics.
Avi Gross, president of Divatex, said the company's cotton suppliers in Asia are fluctuating almost on a daily basis. "We would negotiate a deal with suppliers, but 10 days later they might come back and say they need an increase," he said. "It's very, very drastic. I haven't seen a phenomenon like this for 20 years or more."
The cotton shortage stems from two factors, according to Paul Hooker, president of Sferra Bros. "As the economy came to a grinding halt, growers of cotton pulled back and began growing other things," Hooker said. Plus, in early October, the news came that the cotton harvests throughout the world were well below normal. "Combine these two and you see prices going up," Hooker said.
A further complication comes from the past decade's dramatic growth in all-cotton sheets. The pricing situation is "not good since the market seems to be moving toward 100 percent cotton even more than before," said Barry Leonard, president of Croscill/Ex-Cell Home Fashions/Glenoit.
For the moment, some vendors may be able to keep finished-product prices in line. "We buy cotton well out as futures," Hooker said. "I sent a note to our customers that we're hoping not to have to increase prices through the first quarter of 2010."
How long they will be able to hold the line is a key question, however. "I believe (cotton) prices will keep going up for a long time," Gross said. "The dollar is also not helping because it's going down in value on world currency markets, which adds to the price rises."