COTTON WORTH MORE THAN GASOLINE
Cotton prices surge to 15-year peak
Cotton prices marched to a 15-year high on Thursday, reeling from supply problems and threatening higher clothing prices for consumers.
ICE October cotton futures hit 91.80 cents a pound, the highest price for a front-month contract since October 1995. More actively traded ICE December cotton jumped as high as 89.91 cents a pound, up 2.9 per cent on the ICE Futures US exchange.
The front-month contract topped levels hit during a March 2008 price spike that cost big cotton merchants hundreds of millions of dollars, making some bankrupt. Mike Stevens, a veteran Louisiana cotton trading adviser, said the moves “conjured up memories of March 2008 in traders’ minds and conversations. We have now reached recent targets with no sign of a top in sight.”
So-called softs have been among the most volatile commodity markets this year, with sugar prices surging and plunging and arabica coffee at a 12-year peak. The number of ICE cotton futures and options contracts outstanding has grown 42 per cent since July, while hedge funds and other money managers have more than doubled the size of their bullish bets.
The market moves could hit consumers. VF Corporation, whose brands include North Face outdoor wear, Lee denim and Vans footwear, warned that apparel brands would have to increase prices to offset costs.
“The labour rate and the cotton inflation, that’s real,” Eric Wiseman, chief executive, told analysts.
Prices were responding to flooding in Pakistan, the fourth-largest cotton producer, and crop problems in Greece and Brazil, said Jagdish Parihar, global head of cotton at Olam International, the trading house. Other big producers, such as India, Uzbekistan and Turkmenistan, have millions of bales to sell that have yet to reach market. Traders were also worried about the Indian government’s cotton export policy, he said.
The US, the top cotton exporter, has had logistical challenges in getting this season’s large crop out of warehouses to meet the early sales commitments to Asia, Mr Parihar said.
“In summary, the market is reacting to supply shocks and hedge fund interest. But in the long term there is adequate supply. Any further price increase could cause demand to be rationed due to constraints in passing on the price increase to downstream industries in textiles and retail,” Mr Parihar said.
The International Cotton Advisory Committee, an intergovernmental group, said this week the average global cotton price would rise 15 per cent in the year that began August 1 from the previous year, as the ratio of cotton stockpiles to mill demand falls to the lowest level in 21 years.
In the options pit on ICE’s New York trading floor, call options giving traders the right to buy December cotton at $1.12 a pound saw heavy volume this week, said Roger Corrado, the vice-president of Spectron, commodity brokers.
Economy is bad, and now even the cotton is reaching its peek….. please support the T-shirt business !
Especially WRONGWROKS !