Apparel Costs Likely to Rise as Cotton Prices Surge to Highest Level in 10 Years
When it rains, it pours. Adding to the ever-growing list of pandemic-related supply chain headaches, cotton prices on Monday jumped to $1.05 per pound. That's an 18% increase since Sept. 20 and a 35% increase on the year. It's also the highest price per pound for cotton since November 2011.
A combination of factors is driving these price increases.
Apparel manufacturers are ramping up production to meet returning demand after pandemic lows, with PYMTS.com reporting that U.S. apparel industry revenues for the first eight months of 2021 are up 10% over the same period in 2019.
Cotton prices jumped to fresh 10-year highs on Tuesday. The spike could eventually be passed along to consumers in the form of higher prices on jeans, T-shirts and other clothing. https://t.co/wwUPl0XsR5
— CNN (@CNN) October 5, 2021
On the supply side, COVID-related production challenges and higher shipping prices are impacting cotton in the same way they've impacted other raw materials, like lumber. Fibre2Fashion reported that global cotton production for the last market year (August 2020 to July 2021) declined by more than 7% over the previous period.
Adding to the issue may be the U.S. ban on Xinjiang cotton. In January, the U.S. officially blocked U.S. companies from importing products made in China's Xinjiang province, one of the world's top cotton-producing regions, over reports of forced labor camps. According to CNN, this led to some Chinese companies buying U.S. cotton to manufacture apparel, putting additional strain on the global supply.
Apparel was already seeing signification inflation, with online prices up 15.52% in August (the next closest was nonprescription drugs at 4.66%) and overall prices up 4.2%. The latter figure is in line with general inflation, but increasing cotton costs will likely drive apparel prices up even further.
Countries such as the U.S., Australia and Argentina produce significant amounts of cotton, helping to partially offset some of the issues stemming from China. And, according to Fortune, the U.S. cotton crop, in particular, looks strong this year.
That should help ease things on the supply side. But with no end in sight for other problems plaguing global supply chains, there's no telling how high prices could go before things begin to level out.