Stocks Dwindle, Consumption Rises, Prices Soar
Demand for finished goods is soaring, but so is the cost of raw materials like cotton.
August 19, 2010
Despite the expectation of bumper crops in some of the world’s top cotton exporting countries, global stockpiles continue to decrease. Combined with surging demand, particularly in Asian markets, the price of cotton continues to rise and could reach 15-year highs by the time the next crop reaches the market.
Textile manufacturers are caught somewhere in the middle of the trend. On the one hand, demand for finished goods is ramping up, again with developing nations in Asia leading the way. In China, apparel sales through July 2010 totaled more than US$46 billion, an increase of 24 percent compared with the same period in 2009. The growing middle class in India is also helping to spur growth in the clothing sector.
On the other hand, raw material costs for textile companies are rising, with demand outpacing cotton production for the fifth year in a row, according to the U.S. Dept. of Agriculture. Clothing manufacturers might be forced to pass some of those costs on to consumers, at least until the U.S. harvest, which is expected to be exceptional. Global demand for cotton is expected to increase by 2.7 percent this year, reaching nearly 121 million bales, while stockpiles will be drawn down to less than 46 million bales, a 4.1 percent decrease.