Cotton Prices – highest for 15 years

The price of cotton has risen to its highest price in 15 years mainly because of floods in key producing countries – the price reached 98.79 cents a pound, the highest level for a most-active contract since June 19, 1995. What does this mean for farmers and consumers and is this the end of the $3 T shirt?

Supply pressures

Cotton is a vital crop for some the world’s poorest farmers especially in China, India, and Africa. And they have had some good news over the past year – a 50% rise in value of their crop. The cotton price is now at its highest since 1995. The main reason for this increase in price is the loss of production in Pakistan with the massive floods that have affected the country – Pakistan is the 4th largest producer of cotton. Furthermore production in India, the world’s second-biggest grower and exporter, is estimated to be down from the estimated 32.5m to 29.5m bales as the monsoon rains have lasted longer than usual.

Demand pressures
But there have been demand pressures with excess demand over the last 5 years and the diminishing of global stocks. But market experts estimate the quota remains too small to meet demand, and China, the world’s largest cotton consumer, will import more cotton to fill the gap this year. According to the latest report released by the United States Department of Agriculture (USDA), China is expected to increase cotton consumption by 1.5 million bales in the 2010-11 plant-harvest cycle to 49 million bales from a year earlier.

For farmers in developing countries this is very positive news but for the western consumer this will mean higher prices for low cost clothing such as T shirts.

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