Cotton prices have dropped from $1.04 per pound to $0.8706 per pound in the week ended October 13, 2022 according to the Department of Agriculture. Cotton Incorporated confirmed that many benchmark prices have moved sharpy lower.
A U.S. Department of Agriculture report noted a shift in supply and demand. The latest USDA report featured a decrease in world production and a larger decline in world-wide mill use which is down 3 million bales of cotton to 115.6 million bales.
Economist Jon Devine is quoted by Sourcing Journal “Volatility was a feature of many markets and most benchmark prices moved sharply lower over the past month.” Devine noted that the September New York futures contract fell from levels near $1.05 per pound in early September to levels as low as 83 cents per pound.
Devine noted that the reduction of 2022-2023 consumption estimate followed a 2.1 million bale decrease of mill use in 2021-2022. This muted the net effect on the forecast for 2022-2023 world ending stock but the increase was still a substantial 3.1 million bales to 87.9 million.
The global trade forecast was lowered by 1 million bales to 43.6 million. The latest updates to import figures were all negative and included those for China, Pakistan, Mexico Turkey and Vietnam. All notable adjustments for export forecasts were also all negative, including for Australia, Brazil, India, Benin Cote d’Ivoire and Greece.
Bureau of Labor Statistics Price Index for U.S. made synthetic fibers was up 0.9 percent for the month and 5.8 percent from September 2021. Prices for processed yarn and threads fell 0.4 percent last month but were still up 28.9 percent for the year. Prices for finished fabrics were not up month to month but up 12.3 percent year to year.
Women’s apparel prices declined 0.4 percent last month, topped by a decrease of 1.9 percent in outerwear, while men’s wear was down 1.1 percent for the month, led by a 3.3 percent drop in suits, sport coats and outerwear. In other words, retail apparel prices fell a seasonally adjusted 0.3 percent in September compared to August, when the Consumer Price Index (CPI) rose 0.4 percent
Commenting on the rising prices Fast Retailing CEO Tadashi Yanai said that it is impossible to keep prices unchanged in face of a weak yen and high raw material prices.
Looking ahead, with this month’s revisions to the demand side of the balance sheet, the increase in production is enough to result in a surplus of production beyond consumption according to Devine. While stocks in the U.S. are forecast to be low by historical standards, an increase in warehouse supply is predicted to be at the world level.
One can conclude that the high levels of inventory and the likely promotional efforts of retailers during the holiday season will combine to reduce the prices to the consumer.
POSTSCRIPT: We are seeing the first sign of price reduction. Low demand and consumer resistance to high prices are all contributing to price reductions. The Federal Government’s major effort to bring inflation under control seems to have some success.