By Marvin G. Perez
Cotton futures raced past $1 a pound for the first time in nearly a decade as adverse weather and shipping snags threaten supplies, driving up costs for clothing around the world.
All of this is coming together to drive up prices, which means the cost of making clothing will be on the rise. That will squeeze margins for apparel makers like Levi Strauss & Co., and result in inflation for everything from T-shirts to jeans if retailers try to pass on the expense to consumers.
In New York, the contract for December delivery climbed as much as 3.6% to $1.0155 a pound, the highest since November 2011. The price has surged 28% this year. Gains are being intensified by traders rushing to cover short positions.
With cotton projected to see a second year of global supply deficits, traders are focusing on an updated figure for the shortfall that is due this week from researcher Cotlook.
While the spike to $1 is psychologicallly significant, the rally likely won’t surpass the $2 level reached in 2011, said Louis Rose, a director of research for Rose Commodity Group in Tennessee.
The fundamentals aren’t in place for a doubling in cotton prices, said John Robinson, an economist at Texas A&M’s AgriLife Extension in College Station. While supply chain disruptions are hurting cotton, U.S. production fears are overhyped, he said.
“Since Friday this run-up has been from speculator buying, and that can turn around as fast as it started,” he said.