Against The Odds

 There’s an old story that tells of a very small, very poor nation in some remote part of the
world where leaders were desperately trying to formulate a plan for economic vitality. After
intense, heated debate, the nation’s governors decided to declare war on the United States — the
rationale being that they would be quickly and overwhelmingly defeated. The U.S. government would
then pour billions of dollars into the devastated nation to build a modern economic infrastructure,
and the nation’s citizens would prosper. They were all set to go until a meek voice in the back of
the room interjected, “But what if we should win?”

History and literature are full of stories in which the “little guy” prevails. But logic
would argue that in today’s world of free-flowing information and predictive modeling, the odds are
more stacked than ever against the underdog.

Just try to tell that to one spinner nestled in the mountains of Virginia. In an economic
environment that has claimed some of the industry’s most venerable companies, this “little guy” has
bucked the odds and started a small yarn mill. 

“I’ve raised sheep for most of my life,” he said, “and I spent a great deal of time
traveling across the country to various markets to sell my wool.” He then discovered he could
generate more profit by contracting with yarn mills to spin the wool and provide him with yarn to
sell. But he found that yarn spinning can be a fickle business, and many of his suppliers succumbed
to adverse economic conditions.

“So I decided to start my own yarn mill,” he said. “To say I didn’t get any financing
support would be the understatement of the century. I went to the local bank and they told me to
run, not walk, to the nearest mental hospital before my illness got any worse.” Without financing,
he began to buy equipment piece by piece from mills that were shutting down. “It took awhile, but I
finally got everything in place to spin my own yarn, and began operations several years ago.”

Business has been brisk, he said. He has a small niche of loyal customers who, he says, rave
about the quality of his products. And he has been in contact with global yarn brokers to expand
his distribution.

“It was very simple,” he said. “I had a dream and, despite the fact that everyone told me I
was crazy, I went ahead and made it happen. Business is good and growing.”

Demand Strong, Costs Increase

Demand for yarns of almost all types remained brisk through early March. Ring-spun yarn
remains in short supply, and open-end and man-made-fiber yarns are moving well. In a bit of painful
irony for many spinners, cotton prices dipped ever so slightly in early March from an all-time high
posted a month earlier — just in time for a dramatic increase in oil prices.

“Managing costs seems to be a never-ending struggle at the moment,” said one spinner. “We’ve
been fortunate in that we’ve been able to pass some costs along, but we have to fight
tooth-and-nail every time we try to do so. As good as business has been from the demand side, it’s
not so great when it comes to margins.”

Delivery schedules are still pushing out farther than most spinners — and customers — would
like. “We are doing the best we can to get yarn to our customers in a timely manner, but the
pipeline is full,” one spinner said. “We are six to eight weeks out on some products.”

Cotton Trading Slow

Cotton trading was inactive to light in the last week of February for all but one of the
major U.S. cotton markets. “Domestic mill buyers inquired for a moderate volume of color 31, leaf 3
and staple 34 and longer for April through June delivery,” the U.S. Department of Agriculture
reported. “No sales were reported. Finished product demand remained strong and most mills continued
to operate at capacity. Reports indicated most mills have covered their immediate-to-nearby needs,
but some concern could develop over raw cotton availability in the fall, if operating schedules
continue at maximum levels.”

Some mills are already placing 2011 cotton crop orders for first-quarter 2012 delivery.

March/April 2011