Follow The Bouncing Cotton Boll

The recent fluctuation in the futures prices for cotton is deeply unsettling, as there is little precedent for the wild swings in prices we have experienced over the past few weeks. Many analysts have blamed the entrance of index funds into the market for the extreme movements in the price of cotton on the ICE exchange. Although this may be true, there are a number of other factors that have helped to wreak havoc on cotton prices.

Over the past few months, a sustained rise in prices for textiles has helped to build uncertainty in the cotton market and helped to fuel sharply higher prices for cotton. There is noticeable concern in textile circles that rising prices for basic textiles could translate into lower levels of consumption by consumers in the U.S. and elsewhere. This concern is well founded, as higher wholesale prices will eventually translate into higher consumer prices, resulting in potentially lower levels of consumer purchasing — thus reinforcing reduced demand for textiles over time.

According to new data released by the U.S. Bureau of Labor Statistics (BLS), wholesale prices for textiles and apparel rose sharply in March from comparable year-ago levels. As measured in the BLS Producer Price Index (PPI), prices for yarns and threads rose by a steep 5.4% over March ’07 levels, while at the same time prices for greige fabrics, finished fabrics and industrial textile products each rose by 2.2%, 1.3% and 1%, respectively. For textiles, much of the increase is a direct result of raw material and energy costs. Though it can take months for textile prices to rise as a result of high fiber prices, it is interesting to note that there is a strong correlation between rising prices for textiles and cotton. With cotton prices rising more than 25 cents a pound since early 2005, textile producers have little latitude to absorb the higher costs, as margins for textile producers have remained razor thin in recent years.

Caption (photo):
Robert P. Antoshak

Sidebar (add table):
Comparison: U.S. Cotton Prices vs. Textile PPI Monthly Average 2005-2008

At the same time, these increases follow nearly five years of declining wholesale prices for apparel and mark a significant about-face in prices. From 2002-2006, consumer prices for apparel actually declined, but beginning in 2007 prices began to rise at a gradual, steady rate. Consumer prices as measured by the BLS Consumer Price Index (CPI) indicate that some price increases were passed on to consumers, though the increases were certainly less dramatic than those exhibited by cotton and textiles.

There is little doubt that consumers have already felt the effects of higher prices as stated in the most recent CPI report. The February 2008 CPI for apparel rose by a significant 0.5% over January levels. However, more importantly, over the past six months the compound annual rate for of growth in consumer prices for apparel rose at a steep 2.3%.

Needless to say, consumer sentiment is already in the doldrums. The Conference Board, a leading U.S. business and consumer research organization, said last month that consumer confidence has fallen to its lowest level in more than five years. The Conference Board Consumer Confidence Index, which had declined in February, fell sharply in March. The Index now stands at 64.5 (1985=100), down from 76.4 in January. In March 2003, the Index stood at 61.4 when consumer sentiment was still mired in the effects of the 9/11 tragedy.

The net result: a potential for weaker demand for clothing and, consequently, textiles over the coming months. The price increases posted for apparel are far less severe than those posted in cotton and textiles, suggesting retailers remain reluctant to raise prices too fast out of fear of making a bad situation even worse. Nevertheless, if apparel demand proves anemic in coming months while raw material costs continue to rise the entire textile-retail complex may be in for a serious bout of “stagflation,” resulting in declining profits and a potential shake-out of weaker companies in the supply chain.

So the issue, then, is if textile price increases will result in sustained higher prices for cotton. But, perhaps more importantly, will higher prices for textiles result in lower levels of consumption over the long haul? Such a development would most certainly result in lower prices for cotton. It is this supply-demand component of the supply chain that may require the most intense analysis in the coming months.

In the meantime, the recent fluctuations in cotton prices may continue, a prospect of worry for all concerned.

Leave a Reply

Insect Control Stories
Insect Control

Keep Spider Mites in Mind When Planning Burndown

February 9, 2017

Spider mite management should be a consideration in every grower’s preplant burndown plans.

Insect Control

Insect Control Guide App Available from MS State

February 3, 2017

An app of the Mississippi State University 2017 Insect Control Guide is now available through the iTunes App Store, with an Android version coming soon.

Insect Control

When to Terminate Insecticide Applications in Cotton

August 24, 2016

The decision to terminate insect controls in cotton can be challenging in some fields, but a few basic considerations will assist in that decision.

Insect Control

Finalizing Cotton Insect Control

August 2, 2016

As many cotton fields reach or approach cutout, it’s time for growers to start making final insect management decisions.

Insect Control

Don’t Relax Yet on Plant Bug Treatments

July 26, 2016

Although many cotton fields in the Mid-South are approaching cutout, it’s not yet time to back off on plant bug treatments.

Insect Control

Keeping a Watchful Eye on Plant Bugs

June 22, 2016

Plant bugs are back. Diligent scouting and careful management can help lessen their impact.

Insect Control

Growers Urged to Comment on Aldicarb Re-Registration

June 13, 2016

Cotton growers in the Mid-South have until June 22 to comment on re-registration of aldicarb for use in the region in 2017.

Around The Gin
Product News

EPA Approves DuPont’s FeXapan Dicamba Herbicide

February 17, 2017

DuPont has received EPA registration for FeXapan herbicide plus VaporGrip Technology, a low-volatility dicamba formulation for use on cotton and soybean varieties carrying traits that provide tolerance to dicamba and glyphosate herbicides.

Product News

Fourteen Southern States Register Enlist Duo for Use on Enlist Crops

February 14, 2017

Thirteen Southern states have granted state registration of Enlist Duo herbicide for use on Enlist cotton and other crops, following federal registration received in January.

Product News

BASF Application Academy Adds Online Training Module

February 2, 2017

BASF has added an online training module to its On Target Application Academy stewardship program to help increase education of new and advanced herbicide technologies.

Product News

Bayer Offers Shared Risk Program for FiberMax, Stoneville Growers

January 26, 2017

Bayer is helping support the economic sustainability of cotton growers through the company’s 2017 Shared Risk Program for those who plant FiberMax and Stoneville cotton seed.

Product News

Enlist Duo Herbicide Registered for Use on Enlist Cotton

January 13, 2017

The U.S. EPA has registered Enlist Duo herbicide for use on Enlist cotton varieties, beginning in 2017.

Product News

Data Show Yield Gains from Indigo Cotton in 2016

January 9, 2017

Data collected from 2016 trials show that Indigo Cotton – a seed treatment based on naturally occurring, in-plant microbes to help increase water use efficiency – led to yield improvements on testing acres, including an 11% average yield increase in West Texas.

Product News

FiberMax and Stoneville Release New Varieties for 2017

January 9, 2017

Cotton growers searching to match the right variety the right field now have two new FiberMax varieties and two new Stoneville varieties to consider for 2017.

Product News

PhytoGen Rolls Out Seven New Enlist Varieties for 2017

January 5, 2017

PhytoGen is releasing seven new cotton varieties with the Enlist cotton trait and WideStrike 3 Insect Protection for the 2017 growing season.

Latest News
Insect Control

Keep Spider Mites in Mind When Planning Burndown

February 9, 2017

Spider mite management should be a consideration in every grower’s preplant burndown plans.

Insect Control

Insect Control Guide App Available from MS State

February 3, 2017

An app of the Mississippi State University 2017 Insect Control Guide is now available through the iTunes App Store, with an Android version coming soon.

Insect Control

Cotton Seed Treatment Choices Will Be More Important In 2017

January 26, 2017

Early season thrips control will be more important than ever in 2017 due to the introduction and anticipated use of dicamba-tolerant cotton varieties, according to Mississippi State University cotton specialists.

Insect Control

Insect Traits Evolving for Ongoing Bug Battles

September 8, 2016

As Mother Nature creates new challenges, the industry’s insect technologies must adapt.

Insect Control

When to Terminate Insecticide Applications in Cotton

August 24, 2016

The decision to terminate insect controls in cotton can be challenging in some fields, but a few basic considerations will assist in that decision.

Insect Control

Finalizing Cotton Insect Control

August 2, 2016

As many cotton fields reach or approach cutout, it’s time for growers to start making final insect management decisions.

Insect Control

Don’t Relax Yet on Plant Bug Treatments

July 26, 2016

Although many cotton fields in the Mid-South are approaching cutout, it’s not yet time to back off on plant bug treatments.

Insect Control

Keeping a Watchful Eye on Plant Bugs

June 22, 2016

Plant bugs are back. Diligent scouting and careful management can help lessen their impact.

Insect Control

Growers Urged to Comment on Aldicarb Re-Registration

June 13, 2016

Cotton growers in the Mid-South have until June 22 to comment on re-registration of aldicarb for use in the region in 2017.

Insect Control

Start Putting Plant Bug Plans in Place

June 13, 2016

Early planted Mid-South cotton is beginning to square. Growers need to be on alert for plant bug activity.

Insect Control

EPA Approves Five Section 18s for Transform in Cotton

June 8, 2016

The EPA has granted Section 18 emergency use exemptions in five Mid-South states for use of Transform insecticide for control of plant bugs in cotton.

Insect Control

Monitor and Treat Early for Cotton Thrips

May 17, 2016

With cotton planting underway across the High Plains, cotton producers should be on the lookout for thrips and be prepared to treat, if needed.

Insect Control

Tennessee Sets Cotton Scout School

May 17, 2016

Tennessee’s annual Cotton Scout School is set for May 27 in Jackson.

Insect Control

States Seeking Transform Exemption for Plant Bugs

May 6, 2016

Three Mid-South states have requested emergency exemptions to use Transform for tarnished plant bug control in cotton.

Insect Control

New Webcast Addresses Thrips Management Strategies

May 3, 2016

A new webcast focusing on thrips management strategies for the Southeast has been added to the Focus on Cotton online series from the Plant Management Network and Cotton Incorporated.