• Nothing highlights worldwide cotton like the U.S. cotton industry.
• The carryout is incredibly small — just over one month usage in the U.S.
• Whether these numbers hold up for the rest of 2011 is the big question.
Slow economic recovery
Continued high unemployment and real problems in the housing industry have slowed economic recovery in the U.S., compared to other countries, especially Asian countries. One segment of the U.S. market that is showing a comeback is the apparel market, the cotton expert says.
“People in the U.S. may not be buying big ticket items, like cars and houses, but we are beginning to see an increase in purchasing of clothing, small appliances and other smaller ticket items,” he adds.
Inventories for apparel items are low — maybe because of a lack of buying during the recession by apparel stores. Or, maybe because too many stores went into the recession with low stocks to sale ratios and kept supplies artificially low to cope with the reduction in sales caused by the downturn in the economy.
Now, demand is up. Over the past Christmas season, demand for apparel goods was higher than projected and supplies were low. The result is demand apparel goods helps fuel the frenzy in the cotton market.
On a global basis, demand for apparel goods is rising to meet the demands of a skyrocketing increase in middle class populations in China, India and other rapidly developing economies around the world.
“The supply problem was further complicated by China cutting back on cotton acreage, then suffering weather-related cotton yield reductions on top of the cutback in acres. China, India and other heavily populated Asian countries cannot afford to have food supply problems, and they will likely always err in production on the side of having too much food versus having too much fiber,” Tancredi says.
“In China, this past year, internal prices for cotton were at times 90 cents a pound higher than cotton they bought from the U.S. To bring that high price down, the Chinese bought cheaper cotton from the U.S. and other countries.
“So, the U.S. has a big export volumn of cotton going to China. And, we have a record low carry-out from last year’s crop. There appears to be no way to fix the supply problem and that has fueled the frenzy in the cotton market, Tancredi adds.