Watch Cotton Diving

Cotton prices, which jumped to a high point this year, have fallen by 38% this month. As the price of cotton can not be reflected in the retail price of textiles until the end of next spring, garment manufacturers are faced with the problem of price adjustment. At the same time, cotton merchants also encountered a large number of orders to be canceled.

Cotton prices, which have jumped to record highs this spring, have fallen 38% so far this month, making the textile factory owners and garment producers angry.

A farm in Brazil is reaping. cotton 。 For garment manufacturers, this is a reversal of the situation. They struggled to cope with the rise in production costs last year, worrying about the extent to which additional costs would be passed on to consumers (if possible). And clothing retailers now want to know whether the decline in cotton prices can be maintained, or whether the rise and fall of cotton prices will continue. Cotton prices are now down 53% from their peak in March 4th.

Wiseman, chief executive of VFCorp., the world's largest clothing company, said in an interview in July 21st that cotton prices had never fluctuated so much before.

Garment enterprises are in a dilemma

By the end of next spring, the decline in cotton prices will not be reflected in the retail price of textiles. But clothing companies will have to decide in the coming months whether they are wearing T-shirts or not. Jeans The price will continue to maintain at a higher level to increase the profitability of enterprises, or to reduce prices to ease consumer spending.

Weaver group, which produces Lee and Wrangler jeans, hopes that the price can be maintained. Wiseman said: "the ideal result is that we will be able to maintain the current price level and recover lost territory in gross margin."

Over the past year, the sharp fluctuations in cotton prices are particularly evident. Driven by strong harvest and strong market demand in Asia, cotton prices doubled more than last July to March this year. Cotton exchange settlement in March hit the highest level in 140 years at $2.1515 a pound. Since then, cotton prices have fallen all the way, and so far the decline has been more than 50%. In the US Intercontinental Exchange, cotton futures in December closed at 98.63 cents a pound in July 20th.

The surge in cotton prices at the end of last year forced the clothing companies to think about the strategy. Kaare Oeri, director of consumer and retail business at corney, a management consulting firm, said they could choose to raise their prices or choose to digest their price factors at the expense of profit margins, and also choose to adjust their production processes, use less expensive textiles or reduce clothing decoration.

Specialized production T-shirt Clothing companies like jeans and other low priced goods are most likely to be hit by the fluctuation of cotton prices, because raw material costs occupy a larger share of their total cost.

Underwear manufacturers such as HanesbrandsInc. are especially stressed. For the production of a finished garment, the proportion of cloth to its cost can reach up to 60%.

Han Bai has raised its price this year and plans to raise its price again in the fourth quarter. Noel, chief executive of the company, said the company is consulting with retailers on how to deal with the pricing issue in the second half of 2012. One of the options before them is to increase the number of packages, such as adding a pair of underwear, while maintaining a higher price. Noel said, fundamentally speaking, the impact of the decline in cotton prices has been offset. {page_break}

Cotton purchase contract cancelled

According to cotton traders, many foreign textile mills that have purchased cotton during the rapid rise in cotton prices are now competing to cancel the contracts. They can no longer afford to pay the original price due to reduced demand.

China's largest cotton consumption country released data in June, indicating that China's cotton imports fell by 32% over the same period last year, which confirms the market's fear of weak demand.

In its latest monthly report, the US Department of agriculture lowered its export expectations for us cotton sales for the year July 31, 2012 to 8%, down to 12 million bales. In the year of sale in July 31, 2011, US exports of cotton were estimated at 14 million 500 thousand bales.

The spinning mill that makes raw cotton into yarn is in a dilemma. Jordan Lee, chairman of EasternTradingCompany, a cotton trading company in Green, South Carolina, says that because the price of yarn is more severe than cotton prices, many spinning mills prefer to buy Yarn directly for textile mills.

As a result, Cotton Traders encountered a lot of cancellation of contracts. Even those who could not afford to pre determine cotton prices or no longer needed cotton or even default appeared in Indonesia and Bangladesh. Li said, this is a great problem.

Sasaki, a representative of Kurashiki Textile Corporation, said the company would not cancel the contract. But Kurashiki's textile industry is also affected by fluctuations in cotton prices. He said corporate profits are declining. Because the company purchased raw materials three months in advance, its stock of cotton remained at $2 per pound, but it did not raise prices too much because of competition with lower priced textiles in China.