Fiber Prices Heating Up

n an effort to offer a variety of viewpoints, this month’s column is based on discussions
with a multisystem spinner, a specialty texturizer and a cotton economist.

When asked about the current buzz in the industry, the texturizer said, “The heat, and I’m
not sure they are talking about the weather — trade agreements coming down the pike, plus the
pricing of polyester and other synthetics.”

When asked for their assessments of the upcoming Megatex show in Atlanta, the spinner and the
texturizer had somewhat differing views.

“I’m sure someone from our company will attend — not that we’re investing much in machinery
at the moment,” the spinner said. “We are most focused on shows that bring us into contact with

“I think it will be quite well-attended,” said the texturizer. “You can get a lot done in a
short period of time. … Also, it is more centrally located.”

Running Conditions

The texturizer reports his plants are running full: “We are seeing pretty good business in the
industrial area. Intimate apparel and socks are doing quite well. Antimicrobial products are
catching on.”

He expects to be very busy until the first of the year, noting he got his first order from a
Central America-Dominican Republic Free Trade Agreement country and has even added a couple of used
machines to bump up production.

The spinner also noted reasonably good running conditions with five-day schedules and the
occasional four-day week. “Our six-to-12 month outlook is good,” he said. “Right now, things are
too quiet, with a few customers fortunately bucking that trend. Certain specialty products are
holding up well.”

Rising fiber prices and nearly immovable yarn prices have been the big story in most segments
of the yarn business for some months now. That does not appear to be changing.

“[Domestic] yarn prices are under pressure due to rising raw material costs,” said the
spinner. “Some commission-spun yarn is being sold at head-scratchingly low prices. Cheap imported
yarns are flowing into the US market at a time when there are fewer buyers than ever. This will
also put pressure on margins.”

Cotton Economics

Gary A. Raines III, manager, economics and analysis, Cotton Incorporated, Cary, N.C., provided
some insights into current cotton economic trends from Texas to India.

“I see cotton pricing trending neutral in the short term,” Raines said. “In the longer term,
I expect pricing to be more bullish. We are beginning to see some strength returning to prices.
Demand should outpace production in 2006-07.”

Lingering drought conditions in Texas and parts of the midsouth region also are affecting the
cotton outlook. A year ago, half of the Texas crop was judged to be in good or excellent condition,
compared to only 19 percent currently. In Alabama one year ago, 85 percent of the crop was
considered in good or excellent shape, compared to only 11 percent this year.

If present conditions persist, yields may decline from the current estimate of 765 pounds per
acre and fall well below the near-record 831 pounds reached last season, Cotton Incorporated
estimates indicate. According to the US Department of Agriculture’s most recent Crop Progress
report, 65 percent of the US crop was rated fair or better as of August 6.

The perennial questions cotton economists struggle with each year are, how much cotton will
China produce, and how much will it import?

“I still remain pretty bullish on the outlook for mill consumption in China,” Raines said. “
This year, China is forecast to consume somewhere north of 51 million bales. [R]oughly four out of
nine bales produced worldwide will be consumed by a Chinese textile mill.”

Indian plantings have increased upwards of 15 percent from last season. Current evidence
suggests Indian production could rise to a record 21 million bales and surpass the US crop for the
first time to become the world’s second-largest producer behind China.

“India is the very large bear on the horizon,” Raines said. “In recent years, they have had
very strong growth in production and in yields. From what I’ve heard so far, the current crop is
off to a good start, and they are estimated to export a record 4 million bales.”

September/October 2006