Cotton shortage means more expensive clothing

woman picking cottonAre you a fan of "the fabric of our lives?" Then you may be disappointed with the near-future prospect for cotton. Low production in China, India and Pakistan, and an increase in demand from these same growing markets, could result in a cotton shortage this winter, with higher clothing prices to follow.

The crop in India, the world's second largest cotton grower with 23.5 million bales in 2009, suffered from widespread flooding, as did Pakistan. Some of production-king China's crop (32 million bales in 2009) may have fallen victim to unusually cold weather. Fortunately, the U.S. crop, in 2009, third largest in the world at 12.2 million bales, promises to be bountiful, else the price pressure would be even greater. The U.S. is the world's largest exporter of cotton.

The real culprit in spiking prices, however, is demand in the emerging markets. Producers, fearing a severe shortfall, are spending freely to assure a continued supply of the fabric, and some speculators have jumped into the volatile market. The price of cotton, as measured by National Cotton Council of America's world index, has risen from under $0.93 in June to around $1.27 a pound. The United States Department of Agriculture projects consumption in 2010 will outstrip production by around 4 million bales.

Some companies will try to move clothing production to a cheaper venue to offset higher material costs, according to the New York Times. Others will try to shave the bottom line by switching to synthetics, but that strategy is proving dicey. The Wall Street Journal (subscription required) reports that polyester is also growing more expensive, up by as much as 25%, again due to demand of the same manufacturers looking for an alternative to cotton, as well as fluctuations in oil prices.

Where will you see the effect of the shortage? In your shorts, according to the WSJ, which reported that Hanesbrands, makers of Hanes and Playtex clothes, plans to raise prices by 3-4% this spring. Look for other clothing manufacturers to follow suit.

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