Cotton Rises to Record

Discussion in 'Commodity Futures' started by S2007S, Feb 2, 2011.

  1. S2007S


    Cotton Rises to Record as Adverse Weather Cuts World Supply
    By Jae Hur and Debarati Roy - Feb 2, 2011 10:57 AM ET

    Cotton futures surged to a record on mounting supply concerns after flooding in Pakistan and Australia slashed crops.

    Pakistan, the fourth-biggest grower of cotton, faces a shortfall of 2.5 million bales, according to the nation’s textile mills association. An Australia industry group said last month that 300,000 bales were lost, and the northeast part of the country braced today for Tropical Cyclone Yasi. Cotton inventories monitored by ICE Futures U.S. tumbled 85 percent since June 1 and prices have more than doubled.

    “At the moment, supply is extremely tight,” said Hiroyuki Kikukawa, the general manager of research at IDO Securities Co. in Tokyo. “Nothing can stop the current runaway price for the time being.”

    Cotton futures for March delivery contract rose 3.87 cents, or 2.2 percent, to $1.7609 a pound at 10:55 a.m. on ICE in New York. Earlier, prices climbed to a record $1.7612. The most-active contract advanced 4.5 percent in the previous two sessions.

    The commodity has more than doubled in the past year, pushed by an 86 percent increase in 2010 imports by China as economic growth lifted textile-industry demand and adverse weather hurt domestic-crop quality. Imports totaled 2.84 million metric tons for the year, according to customs data. That’s the most since 2006, when China bought a record 3.47 million tons, data compiled by Bloomberg show.

    China “continues to aggressively buy at high levels in order to ensure delivery of cotton to meet robust demand,” Evren Kopelman, an analyst at Wells Fargo Securities LLC., wrote in a Jan. 31 report.

    For the year that began Aug. 1, the U.S. will be the largest exporter, followed by India, according to the U.S. Department of Agriculture.

    China’s markets are closed for the Lunar New Year holidays. Trading will resume on Feb. 9.

    September-delivery cotton on the Zhengzhou Commodity reached a record 33,790 yuan ($5,131) yesterday.
  2. And yet clothing prices remain depressed.
  3. S2007S


    They remain depressed?

    When is the last time you stopped into a Gap, Express, Guess or Macys? A basic button down starts at $60++

    The only depressed prices I see are the sale prices they try to sell their clothes at well after the fact they been on the sales floor for months.
  4. S2007S


    Here are some articles!!!

    Benetton Group SpA, Italy’s largest clothing maker, said rising raw-material costs may hurt profit in the coming months.

    “If the recent high inflation in raw material costs does not fall in the near future, there could be a significant erosion of margins,” the Ponzano, Italy-based company said in a statement today. Rival Hennes & Mauritz AB, Europe’s second- largest clothing retailer, last week reported a decline in net income after cotton prices almost doubled.
  5. S2007S


    A massive jump in cotton prices could see people paying quite a bit more for everything from jeans to sheets.

    A spokesperson for Wrangler in Greensboro said prices for cotton have jumped a whopping 70 percent over the past eight months, a jump not seen in decades.

    Weather in far off countries such as India, Pakistan and China has destroyed cotton fields and diminished global supply, Andrew Brod, UNCG professor, said.

    Jean prices alone could go up by 30 percent, experts said. The CFO of VF Jeanswear wouldn't specify how much it will increase its prices for jeans, but did say that they will likely increase their prices this year.

    "That's still a lot but the price of the final product generally doesn't move in mock step with the price of raw commodity," Brod said.

    "I know the wholesale prices probably will go up, but as a small boutique owner we probably will try to keep our prices as low as possible," Maurisha McGinnis, owner of Poshh Boutique, said.

    And even with an increase in the price of a good pair of denim likely, some said they would just grin and bear it.

    "If I had no choice, yes I would, because jeans are a necessary item," one shopper said.

    "I buy it because I like to look cute," another shopper said.

    Textiles have been significant to the Piedmont community dating back to the 1900s, when Cone Mills opened its textile plant.
  6. S2007S


    UPDATE 4-H&M falls short as cotton, price cuts hit margins

    By Anna Ringstrom and Rebecka Roos

    STOCKHOLM, Jan 27 (Reuters) - World No.3 fashion retailer Hennes & Mauritz (HMb.ST) warned a squeeze between rising raw materials costs, and in-store markdowns to stay competitive, was set to tighten as it posted a surprise fall in profit.

    The budget chain's shares dropped to a six-month low as it revealed further price cuts this quarter in the battle for market share, and remained tight-lipped on pricing thereafter.

    "Cotton prices will have a bigger negative effect in the first and second quarter," Chief Executive Karl-Johan Persson told Reuters.

    Persson also expected an adverse dollar exchange rate to have an effect in the first half.

    He was upbeat on 2011, even though some governments may slash budgets, which could dent consumer confidence. Retailers are worrying whether they can pass on rising costs to customers.

    "Many experts say 2011 will continue to be good, despite austerity measures. So, overall, I am pretty optimistic when it comes to the global economy and I believe we will grow market share and sales in comparable units."

    The weak fourth-quarter results revealed on Thursday add to concerns that rising prices of raw materials such as cotton CTH1 -- which hit record highs this week on supply concerns -- will especially harm budget clothing chains. [ID:nLDE70N13Z]

    Pretax profit at H&M fell to 7.18 billion crowns ($1.1 billion) from 7.99 billion in its fourth quarter, against a consensus 8.17 billion forecast in a Reuters poll.

    Gross margin shrank to 63.2 percent from 66.3 percent against a forecast 63.7 percent.[ID:nLDE70J239]

    H&M shares plunged 6.9 percent to 212.90 crowns by 1253 GMT.
  7. S2007S


    WINSTON SALEM, N.C. (AP) — HanesBrands Inc. rebounded to a fourth-quarter profit as higher revenue offset rising costs for cotton and other commodities, and the company said it plans to raise prices in the current year to offset the rising costs.

    Hanesbrands, based in Winston Salem, said it expects to raise prices throughout 2011 as warranted by cost inflation. It already raised prices several times through last summer. Depending on product category and where it is sold, some price increases could be quarterly. The increases will range anywhere from the low-single-digit percentages to 30 percent or more for products made with cotton.

    Cotton prices have soared to historic levels due to a worldwide supply shortage.
  8. S2007S


    After more than two years of finding plenty of bargains on the racks, clothes hounds may be in for sticker shock in 2011.

    The rising price of cotton means apparel could get more expensive in the new year.

    Already, cotton prices have hit record highs, and the existing world supply is dwindling.

    In addition, there are higher labor costs in China -- the source of many closet staples -- and increasing fuel prices that could drive up transportation costs.

    Already, major apparel manufacturers and retailers including Nike and Gap have warned about higher supplier prices, and local merchants also report seeing the trend among their vendors.

    The Pants Store, which has four Birmingham area locations, has been getting letters since mid-fall from vendors, citing price increases on the products they sell to the retailer, said owner Michael Gee.

    "Sometimes, on some of the goods, we're able to absorb the costs, but sometimes we have to pass it on to the consumers," he said.

    One vendor in particular is Levi's Jeans, which hasn't had a price increase in a number of years, Gee said.

    While last fall's letter indicated a price increase that will go into effect in February, Gee said Levi's representatives recently made a follow-up call to the store about the price-raising plan.

    "It was like they were trying to gauge how we felt, trying to see how upset we were," Gee said.

    It's a tricky time for price hikes, considering the fundamental changes in consumer behavior since the recession began, said Betsy Holloway, associate marketing professor at Samford University's Brock School of Business.

    "Consumers have really gotten used to pretty deep discounting and sales promotions to fuel demand during this recession," she said. "Consumers have also become far more attuned to comparing prices; they're more prudent and savvy."

    It will be interesting to see how the year unfolds for manufacturers, retailers and their traditional customers, she added.

    "One benefit of high brand equity is the ability to pass along higher prices relative to your competitors," Holloway said. "How these increased costs in the apparel industry impact the manufacturers and retailers across the board remains to be seen -- there might be some that are able to pass along high prices and others that aren't."

    While several economic factors are converging to lift apparel prices, the key is cotton prices. The pressure is coming from robust demand, thanks in part to ongoing population growth, particularly in developing countries; there's also scarce supply, following flooding and other crop failures in heavy producing areas.

    According to the International Cotton Advisory Committee, one key price index is 66 percent higher than last year.

    The group also noted last week that 90 percent of projected U.S. cotton exports and all of India's cotton exports are already committed for this season, contributing to a scarcity that may lead to continued price volatility.

    The United States is the world's largest cotton exporter, followed by India. Central Asia's projected cotton exports are 85 percent committed, and while Australia and Brazil are expanding production significantly in response to record prices, that cotton will not be available until April.

    Like many other retailers, The Pants Store had a strong holiday season and started the new year well, Gee said. But the entire sector is just regaining its footing.

    He said he hopes vendors, who work with higher profit margins than many small merchants like himself, consider absorbing some of the rising production costs for apparel.

    Back in 2008, when the global economic meltdown began, work clothing manufacturer Carhartt had scheduled a price increase but then rescinded it. At that time, a lot of Carhartt customers, including those in the construction and service industries, were out of work, Gee said.

    "They were aware of the fact that people who wear their products were hurting and rescinded the price increase to help the retailer and the customer," he said. "It was nice to see them do that."
  9. My cotton underwear is outperforming my portfolio! Yikes!
  10. I was reading an article the other day, individual cotton growers in China are hoarding cotton in their homes waiting for the price to rise further.
    #10     Feb 2, 2011