First Half Of 2012 A Mixed Bag For Spinners

So, what kind of year will 2012 turn out to be for yarn spinners? On the heels of one of the best
years in recent memory — 2010 — and one of the most turbulent — 2011 — halfway through 2012,
spinners are still uncertain about how the year will be reflected in the history books.

“So far it has not been anything to write home about,” quipped one spinner. “At the same
time, it hasn’t been nearly as bad as it could have been. We’ve gone through a lot worse and not
that long ago. I guess you could sum it up by saying we are disappointed in our results through
mid-June, but cautiously optimistic about the rest of the year.”

Added another spinner: “The first half has been slower than we anticipated. But we’ve seen
some positive signs recently. Beginning about six weeks ago, we noticed an increase in activity,
and it has been pretty steady since then. We believe the market is finally beginning to stabilize
and that we will begin seeing some semblance of normalcy over the next few months.”

A yarn broker said his business has experienced a noticeable uptick in recent weeks. “But it
is focused on just a few areas,” he said. “We’re not seeing as much cotton business as we have in
the past. Poly/cotton blends seem to have replaced 100-percent cotton for a lot of our customers.
We noticed a movement in this direction when the price of cotton shot up in 2010, but we expected
these customers to return to all cotton once the price fell. Cotton prices are still falling, but
we’re still seeing a lot of demand for blends. I think some customers are still concerned about
cotton. They are waiting to see if prices are going to continue to fall. Raw cotton prices fell
another 15 cents or so over the past few weeks. These customers don’t want to find themselves in
the position they were in last year when they had orders for a lot of high-dollar yarn and then
suddenly saw a huge drop in prices.”

One spinner noted that commodity yarn activity for his business remains weak, but specialty
yarns are moving at a brisk pace. “We’re getting some inquiries and making some sales,” he said.
“We’re seeing activity for upholstery yarns, home furnishings and specialty apparel. It’s looking a
lot more promising that it did just a month or two ago. We’re hopeful that we are moving into a
sustained inventory replenishment cycle and that business will remain solid for the rest of the

Cotton Prices Beginning To Recover?

The free fall in cotton prices has been a major concern for spinners since the middle of
last year. Spinners are still coping with having raw material inventories that were purchased at a
price above the current market rate. However, despite a precipitous year-to-year fall and a steady
month-to-month decline, cotton prices rallied substantially in mid-June for the first time in more
than a year.

Quotations for the base quality of cotton in the seven designated markets measured by the
U.S. Department of Agriculture (USDA) averaged 69.11 cents per pound for the week ended June 14.
This price is down from 150.43 cents reported during the corresponding week of 2011 and from 81.24
cents reported in the first week of May 2012. However, the price was up almost 7 cents per pound
from the week ended June 7. Further, according to the USDA, demand was up substantially as well.
For the week ended June 14, spot transactions totaled 5,461 bales, compared to only 1,511 bales the
previous week.

“We’re hoping the cotton market is beginning to stabilize,” noted one spinner. “Our
customers are extremely price-conscious. They are watching prices fall from week to week and only
buying what they absolutely have to have. They are waiting for that price to bottom out. We’re
hopeful that is happening now and that we will see some stability. When we get some equilibrium in
raw material prices, I think you will see sales activity pick up substantially.”

June 2012