Cotton prices have reached levels not seen since the mid-nineteenth century, at the time of the American Civil War – spelling price rises at Britain’s fast-fashion chains. Here is what the retailers have to say:
Marks & Spencer
Britain’s biggest clothing reatiler M&S said last month higher cotton prices and the increased rate of VAT will make trading conditions “more challenging” in 2011. However, M&S hinted that it would try to absorb price rises, and said it would “continue to keep the opening price points to our customers at the same level as last year, and improve the offering we’re giving them.”
Cotton prices hit their highest levels since the American Civil War yesterday, in what analysts describe as “panic” buying by mills.
Floods in major cotton producing areas in Australia, Pakistan and China have hurt supply at the same time as demand from China, the world’s largest user of the fibre, is soaring. Cotton for March delivery jumped as much as 2.4pc to $1.8122 a pound in New York yesterday. However analysts believe that prices may now ease, as the National Cotton Council of America releases the results of its survey on planting intentions today. It’s expected to show an increase in US farmland dedicated to cotton in the current growing season.
Cotton prices have jumped to a 150-year-high, rising to $1.90 per pound on Friday, more than double what it was a year ago and just ahead of the $1.89 record hit during the Civil War, according to the International Cotton Advisory Committee. Cotton prices began soaring in August of 2010 after bad weather cut harvests in major producing countries including China, the U.S., Pakistan and Australia. Restrictions on exports from India, the world’s second-largest cotton exporter behind China, have also produced cotton shortages. On top of that, worldwide demand for cotton has risen as the global economy improves. Raw materials account for 25 percent to 50 percent of the cost of producing a garment. Labor ranges from 20 percent to 40 percent, depending on how complicated it is to make, Bassuk said. On the production side, many Chinese factories that shut down temporarily in the depths of the recession still haven’t returned to capacity. As they ramp up, they’re finding they have to pay workers more because of labor shortages, said John Long, retail strategist at consulting firm Kurt Salmon. Up until now, retailers have resisted passing along price increases to shoppers by shifting production to lower-cost regions like Vietnam, turning to other materials and absorbing cost increases.