Thursday, February 17, 2011
Cotton surge continues after Australia crop worries
LONDON (ShareCast) - Cotton prices hit $2 (£1.25) a pound for the first time ever today amid increasing demand from Chinese textile mills and production problems in Australia.
Australia, the world's fourth biggest producer of the crop, lowered its production forecast earlier this week by nearly 4%.
And last month, a Chinese government commission said the country's textile mills lifted yarn output by 14% to 27m tonnes.
Several clothing retailers, including the high street stalwart Next (Xetra: 779551 - news) and the ultra-trendy SuperGroup (LSE:SGP.L - news) , have warned on the impact of rising cotton prices.
Rising prices for cotton are part of a broader trend of soaring commodity prices. Tensions in the Middle East have helped push the price of a barrel of oil past $104m, not a million miles from the levels just below $150 of 2008.
Food prices have also been soaring. Earlier this month, the UN Food and Agriculture Organisation's (FAO) index of food prices rose to a new record.
The index, which includes foods such as wheat, milk and sugar, rose to 230.7 in January from 223.1 the previous month.
The British shopper is not immune from the commodity rally. The British Retail Consortium (BRC) reported last week that shop price inflation rose again in January, with higher food prices pushing up price tags.
However, the rise in non-food prices was less marked due to discounting. Supergroup said in December that higher cotton prices could hurt gross margins, suggesting that the company is reluctant - or unable - to pass on higher costs to hard pressed customers.
(Source: http://uk.finance.yahoo.com/news/Cotton-surge-continues-digilook-3221633918.html?x=0)
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