Cotton prices went up to 10-year highs on Tuesday, joining a lengthy list of commodities and raw materials that are growing. Cotton futures increased 4% to over $1.09, the highest level since September 2011. The price of the commodity has risen by 22% in the last two weeks alone.
Cotton price hike might eventually be passed on to customers in the form of increasing pricing for jeans, T-shirts, and other clothes. Consumer clothing costs were already rising, and a surge in cotton futures may push them considerably higher.
According to the government's inflation report, apparel prices rose 4.2 percent in 12 months and ended in August. Men's shirts and sweaters (4.4 percent), men's trousers and shorts (6.6 percent), and women's dresses (4.4 percent) all saw increased costs even more (11.9 percent).
Analysts attributed the cotton rally to a variety of factors, including severe weather. Droughts and heat waves have devastated cotton crops in the United States, the world's largest cotton exporter.
"It's a scarcity scenario. The planting season did not proceed as planned "Mizuho Securities director of energy futures, Robert Yawger, said.
Yawger claims that Wall Street traders have pushed cotton prices considerably higher in recent days.
"All the speculators began to jump in, aggravating an already tight market," he said.
At the same time, demand has been quite high, particularly from China. The high demand from China might be a result of US trade policies.
Due to concerns about forced labour, the Trump administration barred US companies from importing cotton and cotton derivatives from China's western Xinjiang province in December 2020.
According to analysts, the penalties, which are still in effect under the Biden administration, have prompted some Chinese companies to buy US-grown cotton, make goods with it, and then sell the products back to the US and other markets.
