Belfast Telegraph

Cotton prices surge to new peak due to supply woes

By Alistair Dawber

Clothing retailers, hit last week by 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% 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 45.4m bales, the lowest level since for 14 years.

In recent weeks, Associated British Foods, the owner of Primark, Debenhams and Next, 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% since this time last year, which is pushing up fabric prices," said Lord Wolfson, the chief executive of Next. "Selling prices of like-for-like product will rise in the region of 5% to 8%."

The British Retail Consortium played down the risk of rising cotton prices being passed on to the consumer. "Retailers are highly competitive and will try their best to minimise the impact on consumers," said a spokesman.

Popular

From Belfast Telegraph