Raw cotton prices are set to soar by 20 per cent, according to industry experts, hurting margins at the world’s leading clothing retailers.
Cotton has been badly hit by the commodities collapse, at times dipping below 50 cents a pound since a high of 95 cents in February 2008. The fall has boosted retailers, who have been looking to offset profit cuts caused by consumers searching for bargains. The price has since steadied at around 60 cents, although this still means that cotton is a loss-making crop for US farmers. Typically they break even at 70 to 75 cents.
The US is the world’s third-biggest cotton producer, behind only China and India. However, many farmers in the 17 states in the cotton belt have switched production to more profitable crops, such as corn and soya beans. This change has started to cause a cotton shortage, which should boost prices. Cotton and polyester are the leading fibres in the clothing market. UK retailers imported $22.3bn (£13.9bn) of garments in 2008, so are sensitive to price changes in both materials