Retailers under the cosh as cotton hits 15-year high

Clothing retailers, hit last week by a raft of disappointing economic data, were left reeling again yesterday when cotton prices exceeded the $1-a-pound barrier for the first time in 15 years.

Contracts for December delivery jumped by nearly 4 per cent to $1.0198 in New York yesterday, and were later matched by prices in Asia. The increases are the market's reaction to limited supply, largely as a result of the devastating floods that have hit a number of countries in South Asia in recent weeks, strong demand, and inventories being run down.

Longer-dated and more heavily traded future contracts for delivery in May next year made even larger gains.

The Department of Agriculture in the US, which acts as the benchmark for crop markets, has forecast that cotton inventories around the world will fall in 2010-11 to 45.4 million bales, the lowest level for 14 years.

"This is the perfect storm for cotton prices," said Michael Haigh, head of commodities research at Standard Chartered.

"You've almost got a check box of factors: demand, supply and inventory. These factors are all moving in the same direction, justifying the current market prices. We don't see any correction in the short to medium term."

Already battling against worrying sales figures, fragile consumer confidence and next January's VAT increase, the cotton price gains will come as a blow to several of the UK's biggest high-street clothing names.

In recent weeks, Associated British Foods (owner of Primark), Debenhams and Next have all warned that rising cotton prices are likely to push up prices at the tills.

"For 2011 we are experiencing significant product cost price pressure from around the world. The price of cotton has increased by 45 per cent since this time last year, which is pushing up fabric prices," said Lord Wolfson, chief executive of Next.

"We believe that selling prices of like-for-like product will rise in the region of 5 per cent to 8 per cent."

The spike in cotton prices will also have been noted by the Bank of England's Monetary Policy Committee. Minutes from the MPC's last meeting, which will be published tomorrow, are expected to show some dissent over this month's decision to keep interest rates at a record low 0.5 per cent, especially with the Consumer Price Index at 3.1 per cent in August, still well above the Bank's 2 per cent inflation target.

Last week, the quarterly inflation expectations poll published by the Bank showed that consumers are expecting a 3.4 per cent hike in inflation in the next 12 months, with increased retail prices a factor.

But despite the gloomy picture painted by Lord Wolfson, the British Retail Consortium, which represents the interests of the retailing industry, has sought to play down the risk of rising cotton prices being passed on to the consumer.

"Of course, this comes as an added pressure, but retailers are highly competitive and will try their best to minimise the impact on consumers," said Krishan Rama at the BRC.

The cotton price jump comes ahead of Friday's emergency meeting of the United Nations' Food and Agriculture Organisation to discuss rising soft commodity prices.

Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
A scene from the video shows students mock rioting
newsSchool leaver's YouTube video features staging of a playground gun massacre
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
Morrissey pictured in 2013
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Robyn Lawley
ebookA unique anthology of reporting and analysis of a crucial period of history
i100  ... he was into holy war way before it was on trend
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain