T-Shirt And Jean Inflation Coming With Decade High Cotton Prices

Cotton futures in New York are squeezing higher Tuesday morning, racing past $1 per pound for the first time in a decade as adverse weather conditions and robust demand tighten global supply.

In New York, the contract for December delivery climbed as high as $1.01 per pound, the highest since November 2011. In the last six sessions, prices have surged more than 14% on news of heavy rains damaged crops in Texas and Mississippi, the top growing regions in the U.S., according to Maxar Technologies Inc.’s senior meteorologist Donald Keeney who spoke with Bloomberg. 

Higher fiber prices could soon mean more expensive T-shirts to jeans and other apparel, which would be another headache for consumers already paying an arm and a leg for gas and food. 

Some analysts believe the mechanics of the push higher in prices is because of an epic short squeeze. 

“This is a classic short squeeze,” said Peter Egli, the Chicago-based director for Plexus Cotton Ltd. “The trade is short.”

O.A. Cleveland, a Mississippi State University economics professor, and consultant, believes more price gains are coming because of the “outstanding short positions in the market.” 

Supply chain disruptions could make matters worse for the industry.  An economist for North Carolina-based researcher Cotton Inc., Jon Devine, said, “it is not easy to get cotton to mills in short order.” 

Devine said China has been increasing U.S. supplies in recent weeks. The “raw-fiber equivalence of cotton estimated to be contained in U.S. apparel imports has been occurring at the highest rate since the 2010-11 price spike” when futures reached record highs, he said. 

A significant problem developing is China’s move to acquire U.S. cotton comes when Beijing has shut down electricity-intensive factories such as apparel manufacturers to conserve power. All of this means consumers could see price increases in the clothing they purchase.