It’s beginning to sound like a broken record. Prices on commodities and raw materials climbing to levels unseen in years. This time, it’s cotton prices that just jumped to a 10-year high.
Cotton futures rose 4% to sit at $1.09, making this the highest level they’ve seen since September 2011. Just in the past two weeks along, cotton has climbed an astounding 22%.
This is most definitely not good news as the holiday season approaches and apparel prices were already beginning to climb. This cotton price jump could easily drive prices even higher.
During a 12-month period that ended in August, consumers dealt with apparel prices that saw a 4.2% rise. Look at men’s shirts and sweaters, they took a 4.4% leap, men’s pants and shorts rose 6.6%, and women’s dresses blew up with an 11.9% climb.
There were a few factors, according to analysts, that helped cause this surge. Most pointed to extreme weather as the culprit saying droughts and heat waves destroyed cotton crops in the United States. This had a major effect on our standing as the world’s leading cotton exporter.
He also noted that the Wall Street traders in recent days have driven cotton prices higher. “All the speculators started to jump in, exacerbating a tight market,” Yawger said.
While the U.S. deals with the shortage, the demand for cotton has been remarkably strong, especially from the Chinese market. Their heavy demand for cotton could be coming from the US Trade policy.
In December 2020, President Trump’s administration rightfully blocked any US company from importing cotton or cotton products that originated in China’s western Xinjiang region due to the serious concerns about China’s forced labor in that region.
But these penalties, which the Biden administration has so far kept in place, have caused China to work the old “end-around.” Now, some Chinese companies are buying US-grown cotton, making goods with our product, then turning around and selling these items back to the United States and various other markets.
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Cotton prices are not the only raw materials that have seen such a tremendous jump. Lumber saw a huge spike over Spring as its price nearly quadrupled. While its price has found its way toward stabilizing, it is again beginning to see another rise.
The lumber situation, though, is much different than what we are now seeing with the Chinese demand and how it’s affecting cotton prices. The historic lumber shortage came from mass sawmill shutdowns while those stuck at home because of the pandemic decided to raid all lumber and hardware stores to complete their home projects. It was a perfect blend of unfortunate timing.
Consumers are not only having to deal with the rise in cotton prices but there may also be an increase in prices due to the transport costs associated with moving goods across the nation. The bottlenecks at the US ports aren’t helping matters and all these costs are being transferred to you, the consumer.
While “doom and gloom” is the phrase of the day, there actually is some good news as it pertains to cotton. This year’s cotton crop looks to be promising. With 13% of the U.S. crop already harvested, the U.S. Department of Agriculture reports that 62% of the crop is rated as good or excellent, which is a vast improvement over the 40% from a year ago.
Hopefully, this only translates into a temporary spike in price. How’s it for timing, though. Right as the holiday season approaches, prices jump drastically.