Moving toward Higher Prices and Better Quality
February 10, 2011 Although yarn prices have not increased in step with fiber prices so far, it remains to be seen whether they will catch up in the coming months.
While spinners have been able to raise their prices substantially, those who rely on subsequent processes such as fabric forming and garment making have not been able to pass along these price increases fully–and in some cases, not even in part–to brands and retailers.
Retail prices have been too low for too long. The consequence, as we are now learning, is a real shortage of fiber. Fiber prices are highest in China, but are otherwise comparable around the globe for both upland and extra-long staple (ELS) cotton. Yarns are in short supply everywhere we look. In South America, there is now a tremendous demand for yarns, and prices have moved up to an extent I would not have believed just a few months ago.
To deal with this uncertainty, brands and retailers need to build relationships throughout the supply chain and communicate regularly to get (as much as possible) the real story. A close relationship, with good information exchange throughout the whole supply chain, will benefit everyone long term. Playing one against the other is a short-lived and shortsighted business strategy.
Shortages will continue until at least the third or fourth quarter of 2011, barring any unforeseen events, such as a war on the Korean peninsula or some other catastrophic event. I predict that the markets will adjust over time and foresee a more normal market in the fourth quarter of 2011 and beyond.
However, I do not believe we will return to the extremely low fiber prices we’ve seen. The landscape has changed. Not only is apparel consumption steadily increasing in developing countries, but so is the demand for food. Farmers have choices. They don’t need to plant cotton at any price, and grains will give equal returns with less risk. We will have to learn to live with higher expenses for clothing and perhaps buy fewer–but more costly and higher quality–items. I believe that in a high-price environment, quality becomes more important. We are moving away from the extreme “wear and throw away” mentality.
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