Agriculture & Food

Since 2021, people all over the world have felt the inflationary pressure of "clothing, food, housing and transportation". Among them, the textile industry involved in clothing, its raw material-cotton is also experiencing an unprecedented wave of price increases. As an important cotton exporter in the world, the US cotton futures market has also been hit, and this also indicates that the cost of T-shirts and other clothing manufacturers will rise.

According to the Financial Associated Press, on September 28, local time, the price of the main cotton futures contract on the American Intercontinental Exchange (ICE) has shown an upward trend for the sixth consecutive trading day. The overnight trading price was once close to the mark of US$1 per pound, setting a new record. The price has reached a new high in the past 10 years. Out of the forecast that cotton will be in short supply in the future, the price of U.S. cotton continues to rise. As of September 28, ICE cotton futures have gained 48% in the past 12 months.

The report pointed out that the current intercontinental states such as Texas and Mississippi are facing a "threat of heavy rain", which will undoubtedly affect the country's cotton exports in a certain period of time. In addition, the "congested" situation of global freight transport has further promoted the surge in cotton prices. An economist from North Carolina in the United States pointed out that the United States has very little cotton production in 2020, and it is not easy to harvest this year’s cotton in a short period of time and send it to textile mills.

A few days ago, American clothing giant Nike also issued a warning that due to the suspension of its factories in Vietnam for many days, the company’s commodity inventory will face a severe shortage. Right now, the price of raw materials has risen, which means that the cost of manufacturing clothing will also rise. For the majority of retailers, this cost may ultimately have to be paid by consumers themselves. But the tricky thing is that due to the impact of the new crown epidemic, everyone's salary level has not increased, consumer desire itself is not enough, and product prices continue to increase may suppress demand.

At the same time, overseas buyers' demand for US cotton is still soaring. According to a report released by the United States Department of Agriculture (USDA), from September 10th to 16th, the United States received a total of 78,406 tons of upland cotton export orders from buyers from various countries, an increase of 21% from the previous month; and in the 2021-2022 fiscal year, The United States shipped more than 40,000 tons of upland cotton.

According to data, seeing the supply chain crisis in the global textile industry, Turkey, Pakistan and other countries are frantically "adding orders" to cotton to promote the normal operation of their own textile industry. As early as July, the media reported that Pakistan intends to increase the scale of cotton yarn imports to meet its domestic cotton demand. At that time, the price of U.S. cotton purchased by Pakistan from the United States soared to 98 cents per pound.

A few days ago, a report showed that in the first 11 months of 2020-2021 (October 2020-September 30, 2021), Turkey imported more than 1.05 million tons of cotton, and the scale of cotton exports during the same period was nearly 120,000 tons. It is reported that the United States is the largest import source of Turkish cotton, accounting for more than 24% of its cotton imports. However, due to the continuous soaring of US cotton futures prices, some market sources pointed out that Turkey is considering turning to Brazil and Mexico to purchase more cotton.

In addition to seeking to diversify imports, Turkey is also expanding the scale of cotton cultivation. On the occasion of the new fiscal year, Turkey plans to increase its cotton planting area by 28%, and the output is expected to reach 750,000 tons, a year-on-year increase of 19%. However, considering the strong domestic demand for cotton, Turkey is considering reducing its cotton exports in the next fiscal year, and it is estimated that only 110,000 tons of cotton will be exported.