Fiber and Fabric Price Hikes Funnel Apparel Toward Inflation

Updated: May 19

By Sourcing Journal

This article was published in Sourcing Journal May 14, 2021. We're sharing because it dives into trends and forecasts related to fiber and fabric demand. It touches on the role Covid-19 has played in driving that demand, plus the U.S.-China trade relationship.

Raw material prices are on the rise as demand surges, and the effects are ricocheting down the supply chain.

Yarn and fiber makers are making adjustments, while brands are getting ready to hike or, already have raised, prices to protect their bottom lines.

All benchmark cotton prices increased over the past month. Cotton Incorporated noted in its monthly analysis that since early March, the July New York ICE futures contract rose to above 90 cents per pound from 78 cents. Cotton Inc.’s report released on Thursday said in the latest trading, prices have been near 88 cents per pound.

The Cotlook A Index of average global spot prices increased to 95 cents per pound in early May from levels near 85 cents in early April. The U.S. Department of Agriculture (USDA) reported that U.S. spot cotton averaged 84.03 cents per pound for the week ended May 6. That was down from 84.92 cents the prior week, but up from 50.02 cents a year earlier.

Cotton Inc. said while stock levels and stocks-to-use ratios are expected to decrease in the upcoming crop year, the early USDA outlook suggests that supply will remain elevated.

“Even with ample supply in the current crop year, prices have been able to manage consistent increases,” the report said. “The divergence between supply and demand figures and prices makes price forecasts based on market fundamentals a challenge. A factor that appears correlated with price movement has been the evolution of the U.S.-China trade relationship.”

Despite Covid, the U.S. is projected to export the third-highest volume on record, 16.3 million bales, during the 2020-21 crop year. With shipments to most other markets lower, this has been driven by business with China. Cotton Inc. said