Post on 01-May-2018
transcript
The Impact of Soaring Cotton Prices on Consumer Apparel
Prices
Esteban Balseca International Price Program
19 Jan 2012
Cotton Prices
Soaring cotton prices
300% to 400% increases in 2 year period
Why has this sharp increase occurred?
How will it affect consumer prices?
2
Cotton Industry
Millions of people worldwide depend on cotton related activities
≈ 90 countries grow cotton
≈ 55 countries export cotton
≈ 150 countries import cotton
Despite all of this, the industry is relatively concentrated.
Over 65% of Total Production: China, India, U.S.A.
3
China
World’s largest producer
World’s largest consumer
World’s largest importer
4
Aug-July Seasons: 2007/08 2008/09 2009/10 2010/11
Production 30.91% 34.20% 31.50% 26.45%
Consumption 41.26% 39.89% 42.02% 40.28%
Imports 29.26% 22.95% 30.03% 33.61%Source: USDA
China Cotton
Relative to World Totals
India
World’s second largest exporter
World’s second largest producer
World’s second largest consumer
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Aug-July Seasons: 2007/08 2008/09 2009/10 2010/11
Production 20.05% 21.06% 22.64% 22.03%
Consumption 15.05% 16.14% 16.64% 18.13%
Exports 19.18% 7.95% 18.54% 14.33%Source: USDA
India Cotton
Relative to World Totals
United States
World’s largest exporter
World’s third largest producer
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Aug-July Seasons: 2007/08 2008/09 2009/10 2010/11
Production 16.04% 11.93% 12.01% 15.70%
Exports 34.78% 44.04% 33.71% 40.45%Source: USDA
US Cotton
Relative to World Totals
0
10
20
30
40
50
2007/08 2008/09 2009/10 2010/11
Exports
USA India World
7
0
20
40
60
80
100
120
140
2007/08 2008/09 2009/10 2010/11
Production
USA China India World
0
20
40
60
80
100
120
140
2007/08 2008/09 2009/10 2010/11
Consumption
China India World
Production and Consumption:
Export Prices
2008 Financial Crisis Five consecutive months of export price decreases, for a total
decline of 21% 2009 China and India governments increase purchase of local cotton Demand for U.S. exports increases Prices begin to rise
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50
70
90
110
130
150
IPP
Ind
ex
Val
ue
s
US Cotton Exports
Export Prices
2010 Unfavorable weather conditions
India bans exports
High commodity prices
Post-recession consumption
Prices increase 153.8%
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50
100
150
200
250
300
350
400
Dec
-09
Jan
-10
Feb
-10
Mar
-10
Ap
r-1
0
May
-10
Jun
-10
Jul-
10
Au
g-1
0
Sep
-10
Oct
-10
No
v-1
0
Dec
-10
Jan
-11
Feb
-11
Mar
-11
IPP
Ind
ex
Val
ue
s
US Cotton Exports
Export Prices
The market reacted: volumes and prices trended downward.
10
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500
1,000
1,500
2,000
2,500
0
50
100
150
200
250
300
350
400
Mar
-08
May
-08
Jul-
08
Sep
-08
No
v-0
8
Jan
-09
Mar
-09
May
-09
Jul-
09
Sep
-09
No
v-0
9
Jan
-10
Mar
-10
May
-10
Jul-
10
Sep
-10
No
v-1
0
Jan
-11
Mar
-11
May
-11
48
0 lb
bal
es
(10
00
)
IPP
Ind
ex
Val
ue
s
US Cotton Exports
Volume of U.S. Cotton Exports IPP Cotton Export Index
Import Prices
Post-recession consumption
Transportation costs linked to oil prices
Dollar vs. Yuan
Higher apparel import prices
What will the effect be on domestic apparel prices?
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Pass-through?
China:
40% of U.S. Apparel Imports
33% of U.S. Cotton Apparel Imports
Labor markets in China
Labor accounts for 20% of textile manufacturing costs
Increased internal demand
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Pass-through?
Consumer apparel prices have been on the rise and bear watching in the near future
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92.0
94.0
96.0
98.0
100.0
102.0
104.0
106.0
108.0
110.0
112.0
IPP Cotton Apparel Index CPI Apparel less Footwear
Updates
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500
1,000
1,500
2,000
2,500
0
50
100
150
200
250
300
350
400
Mar
-08
May
-08
Jul-
08
Sep
-08
No
v-0
8
Jan
-09
Mar
-09
May
-09
Jul-
09
Sep
-09
No
v-0
9
Jan
-10
Mar
-10
May
-10
Jul-
10
Sep
-10
No
v-1
0
Jan
-11
Mar
-11
May
-11
Jul-
11
Sep
-11
48
0 lb
bal
es
(10
00
)
IPP
Ind
ex
Val
ue
s
US Cotton Exports
IPP Cotton Export Index Volume of U.S. Cotton Exports
Prices and U.S. exports have continued to drop
Updates
15
90.0
95.0
100.0
105.0
110.0
115.0
120.0
Jun
-09
Au
g-0
9
Oct
-09
Dec
-09
Feb
-10
Ap
r-1
0
Jun
-10
Au
g-1
0
Oct
-10
Dec
-10
Feb
-11
Ap
r-1
1
Jun
-11
Au
g-1
1
Oct
-11
IPP Cotton Apparel Index CPI Apparel less Footwear
However, textile import prices have continued their upward trend and seasonally adjusted U.S. apparel prices have followed.