Business

Your clothes may be about to become more expensive as cotton prices hit a decade high

Shopping
A woman shops for clothing July 12, 2021 on Cape Cod in Orleans, Massachusetts.

  • Clothing prices could be on the rise soon due to surging cotton prices.
  • On Tuesday, the commodity hit its highest level since 2011, as decimated crops meet rising demand.
  • Retailers may struggle to offset the cost hike as it piles onto a host of supply-chain issues.
  • See more stories on Insider’s business page.

Clothing prices are in danger of rising ahead of the holiday season.

Cotton prices hit a 10-year high on Tuesday – a sign clothing prices may be on their way up as well. Over 75% of the world’s clothing contains at least some amount of cotton, according to Cotton Inc. Items that use more cotton, including T-Shirts and jeans, are likely to be impacted as well.

Cotton prices have surged 22% in the past two weeks alone. On Tuesday, cotton futures hit $1.09 per pound – the highest price since September 2011. Analysts told Bloomberg that several factors have contributed to the surge, including droughts and extreme heat decimating cotton crops in the US, the world’s largest cotton exporter. An increase in demand, particularly from China, has also helped boost the commodity.

Robert Yawger, director of energy futures at Mizuho Securities, told CNN that Trump-era trade restrictions have forced some Chinese companies to buy US cotton in order to make their goods and sell them back to US consumers. The restriction prevents US companies from importing cotton from China’s Xinjiang region due to concerns the products were made using forced labor.

The chief economist at the National Retail Federation, Jack Kleinhenz, told Fox Business that the last time cotton hit these prices retailers tried to substitute artificial fibers for cotton.

“Last time this happened it added about $1.50 to $2 to a cotton T-shirt,” Kleinhenz told Fox Business.

Cotton planting in Xinjiang
Cotton planting in Xinjiang

But, the cotton shortage isn’t the only issue retailers have to deal with. The price hike comes at a time when consumer prices are already inflated. On Monday, Bloomberg reported a gauge of global commodities that tracks crops, energy, and metals hit a record high as demand for materials and global supply-chain snags make the products increasingly more valuable.

Clothing prices have been on the rise this past year, climbing 4.3% in August as compared to the same time the previous year, according to data from the US Bureau of Labor Statistics. Some items have been more impacted than others, such as men’s pants and shorts, which rose 6.6%, and women’s dresses, which increased by nearly 12% over the past year ending in August.

Increases in consumer prices are the result of shortages and shipping delays caused by COVID-19 shutdowns in the supply chain as well as the impact of severe weather on crops paired with a boom in demand for household goods since the pandemic started.

Brian Yarbrough, senior analyst of equity research for Edward Jones, told Fox Business that companies will have more trouble avoiding price hikes this year than they have in the past when cotton prices have surged as they combat historic shipping prices and a national labor shortage.

“I think consumers are definitely going to feel the pinch of that when they get holiday shopping and moving to the next year,” he said.

Read the original article on Business Insider

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