An uptick in cotton prices has begun to stall, and experts now believe the price of cotton and apparel will remain stable over the course of 2015. Last month, cotton futures reached a 5 1/2-year low of 57.30 cents a pound, but since then have climbed over 20%, hitting a price today of 71.75 cents a pound.
“I feel personally that cotton will remain fairly low-priced. It won’t go below the 57-cent mark. I think we’ll see it stay in the 60-cent, low 70-cent range,” said David Bebon, CEO of DBEBZ Apparel, a manufacturer of men’s and ladies’ woven and knit sport shirts.
Prices stalled Friday after the U.S. Department of Agriculture revealed in a report that the country was running a deficit of net export sales of cotton, largely due to a high number of cancellations. In particular, Turkey cancelled orders for 95,000 bales of cotton because of a trade dispute between the two countries.
There is currently a massive overall surplus of cotton – a record 109.84 million bales, compared to 101.7 million bales on average from 2013-2014. After stockpiling massive amounts of cotton over the last four years, China last year released much of its considerable cotton inventory into the market. In addition, record cotton prices from 2011 (reaching a monthly high of $2.30 per pound) led to a surge of cotton planting, making the fiber widely available now. Last week’s USDA report announced that U.S. growers were expected to plant 9.7 million acres of cotton this coming season, a 12% decrease compared to last year.
“When the price gets lower than it is right now, it doesn’t make sense economically for farmers to plant and harvest it because of the price components,” said Greg Brown, COO of Keya (asi/64602), a supplier of ring-spun cotton T-shirts.
With apparel prices, typically there is a lag time because apparel manufacturers buy cotton six months in advance. Still, even if cotton prices remain low, Bebon among others believes apparel prices won’t drop significantly – and attributes possible reductions in this industry to price competitiveness among T-shirt manufacturers. “Some of the price reductions you may see in the next couple months,” he said, “could very well be market share strategies and not a reflection of cotton or labor prices.”