According to figures from the USDA, US Cotton planted area is expect to drop by 20% in 2007, the fewest acres since 1989. It is assumed that the difference will need to be made up in imports from other countries, which have already been on the rise. Cotton imports from 1996-2006 are up roughly 250%. However, despite increases in world cotton output, demand is still outpacing production. This has already caused an increase in world cotton prices, but less so then for other commodities.
Not surprisingly, China plays a large role in this equation for the US. In January 2007, cotton imports from China increased by 64% year-over-year. Helping buy China’s cotton output has been this strong demand and a seed subsidy from the government.
The Chinese government is beginning to take on its growing trade surplus by decreasing many of its domestic subsidies that have been helping its local industries.
So, it is very possible that apparel manufacturers and retailers will both face increasing prices in 2007.
If this is the case, they will face shrinking margins or the conundrum of passing along the increase to the consumers at a time when they will already be pinched by gasoline prices. The key factor in this for US based farmers and companies will be China, who could significantly alter these forecasts in either way. |
