Thursday, March 24, 2011

Price Talk - Cotton

Not too long ago cotton prices had been declining. This was directly linked to the increased popularity of other fibres (some artificial) particularly in the fashion clothing industry.

Because of declining demand cotton became less & less profitable, hence many farmers turned to different, more profitable crops (mostly grains).

According to the U.S. Department of Agriculture (USDA). This year cotton farmers around the world will harvest the lowest acreage in more than two decades.

The only problem is, the farmers cut back exactly when global demand started rising.

In addition, China which grows the most cotton, has undergone a significant drought/flood cycle, & India had major floods just before the last harvest.

So reduced cotton planting combined with a very poor harvest over 2 years has significantly reduced supply & global trends have significantly increased demand.

The result being that cotton prices have more than doubled the past 16 months. It is hoped that prices will reduce by the end of 2011 but with such uncertain climatic events occurring, as well as some anticipated profiteering from growers & mills alike... so don't hold your breath.

For the first time since we can remember, high performance synthetics such as lightweight polyester are actually cheaper than cotton.

The graph shows Price per Pound (lb) of Cotton in
US Dollars from January 2009 to March 2011.


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