Forbidden Chinese cotton is only part of the problem. (Photo by Pulati Niyazi / VCG via Images) VCG via Images
Every few years , the cotton industry likes to remind the world that this is an agricultural crop, not a factory made product.This is one of those times.
This month, the price of a pound of cotton hit its highest level in a decade, hitting $ 1.16 at the last check. Cotton was trading between $ 0.75 and $ 0.90 for much of the last year or two, so this peak represents a big increase in the order of 30 percent, a substantial increase even. in the ever-volatile world of commodities.
Yet the last time cotton was so expensive, it was much more expensive - a lot. During the period 2010-2011, cotton sold for up to $ 2 a pound, more than double its usual rate and it wreaked havoc on the world of cotton users, that is, ie basically anyone who makes, sells or wears products like jeans, t-shirts. , sheets and towels.
The driving forces of this period are some of the same factors that hit just about every commodity -man-made, machine-made or otherwise - all over the world. Labor and transportation shortages, increased demand and rising costs associated with the supply chain have all come into play, as with everything from petroleum to computer chips to toilet paper. .
But cotton adds another layer of complexity due to natural and political factors. Weather conditions - mainly droughts - have had an impact on cotton production around the world, particularly in the United States, the third largest cotton producer (after China and India) and the largest exporter. cotton to the world. In India, the monsoons have not been up to their historical levels, reducing the global cro p there too.
Politically, everything revolves around China. HangsIn the last days of the Trump administration, cotton from the country's Xinjiang region (its largest growing area) was banned in the United States due to concerns about how the country was treating its Uyghur minority population . President Biden has not lifted the ban since taking office, forcing Chinese manufacturing companies to import more cotton from the United States and elsewhere, putting additional pressure on world prices. Chinese domestic cotton is mainly used only for products sold in the country, although there are some exceptions around the world.
So far, in the current climate of rising prices for many consumer products, manufacturers and retailers have been able to pass at least some of the increases on to consumers. This was not necessarily the case ten years ago, when buyers were much less inclined to access.pter higher retail prices.
But a decade back, the massive surge in cotton prices has had a profound impact on the types of products Americans buy and use. On the apparel side, jeans sales - which were down before all of this - slowed further and the rise of sportswear that uses more synthetic fabrics has really started to accelerate. In home textiles, cotton's market share declined, replaced by sheets and towels labeled "micro-fiber" which were essentially 100% polyester with a nifty marketing hook.
Although sales of cotton fashion and home products have regained market share, these alternatives remain important factors in the market.
In the meantime, the share prices of some companies specializing in cotton products are taking a hit, although the rise is relatively recent inthe long supply chain typically experienced by home and clothing businesses. And there is no clear forecast as to whether the rise in cotton prices will continue or fail in the short term, as we have seen for products like lumber earlier this year. year (although these prices start to rise again). And even if these higher prices persist, they are still barely half of the surge of ten years ago.
Cotton is a seasonal product that produces one crop per year and in the United States the 2021 crop is being harvested right now. The price hike reflects lower expectations for the new crop, but it won't be confirmed until the process ends next month.
In March and April, the whole process will start again. Cotton, as said before, cannot be made. It grows ... but not on trees.