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Yarn Market

Cotton Prices, Demand Remain Stable

Jim Phillips

The price of cotton, so up and down over the previous few years, seems finally to have stabilized. From more than $2.00 a pound less than two years ago, the price plummeted to less than 70 cents per pound by mid-2012. Since then, the price has been steadily inching up, with some variation, in small increments.

As of May 3, 2013, spot cotton quotations for the base quality of cotton — color 41, leaf 4, staple 34, mike 3.5-3.6 and 4.3-4.9, strength 27.0-28.9, uniformity 81.0-81.9 — in the seven markets measured by the U.S. Department of Agriculture averaged 80.44 cents per pound for the week ended Thursday, May 2, 2013. This compares to 81.24 cents per pound reported for the same week one year ago.

Cotton Market Activity Picks Up
However, cotton market activity has picked up considerably. Spot transactions accounted for 7,009 bales for the week ended May 2, compared to 5,736 bales reported a year ago. Total spot transactions for the season so far were 1,616,583 bales, compared to 840,308 bales a year ago.

"Some sense of stability is exactly what our industry needs," said one spinner. "You can see this in the steady environment we've seen over the past nine months or so. It's those big jumps — the really high highs and the really low lows — that have made it tough for all but the strongest in this industry to survive."

The steady environment he refers to continues to manifest itself through strong orders. "I am quoting on larger, longer, more frequent orders than I have for a long time. I am getting calls every day from people who, a year ago, I couldn't get to return my calls," said one yarn seller. "Ring spinning remains in very tight supply. Synthetics are selling, too. Some customers moved from cotton to synthetics a few years ago, when the price of cotton soared so high, and have never moved back."

Added a spinner: "We are running full. However, because there is so much variance these days in customer demand, some of our orders are still relatively short. Seems like we still do a lot of changing out."

Pricing Still An Issue
Just because business has been stronger, however, doesn't mean that yarn spinners are care-free these days. "Pricing remains an issue for us," said one spinner. "Even in times when finding available yarn positions can be tough, customers fight for every penny. It seems like we are never at a point of equilibrium. Either the price of cotton is low and customers want us to sell at a price that barely squeezes out a profit, or the price of cotton is high, and we can't afford to sell it at the prices customers are willing to pay. When oil is in short supply, everybody knows gas prices are going to go up. Yet, when yarn is in short supply, we are expected to keep any price increases to an absolute minimum."

Consumer Confidence Up; Trade Agreement Fears Remain
What should be further good news for spinners is that consumer confidence continues to grow. Consumer expectations have improved in both their short-term economic outlook and income prospects, according to the Conference Board Consumer Confidence Index®.

As mentioned last month, however, spinners across the Western Hemisphere are still watching the development of the Trans-Pacific Partnership agreement — and, particularly, closely following whether Vietnam will be allowed to enter into the agreement without a yarn-forward rule. "This is something that, potentially, could have a profound impact on this industry throughout this hemisphere," said one spinner. Without a yarn-forward rule, observers are concerned that Vietnam could import apparel into the United States duty-free regardless of where the yarn originated.

Overall, many spinners are highly satisfied with the first four months of 2013. "I've got customers," said one yarn broker. "I've got orders. And I still have yarn to sell. It's getting a little harder to find and longer to get, but it is there. As of now, I see no reason to expect conditions to change significantly over the short term. Of course, you never know what to expect, but my confidence at the moment is as high as it has been in a while."

May/June 2013


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