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Cotton Prices Surge on Asia Supply Scarcity


Cotton prices have surged to new 15-year highs as exports from Asia fall. Textile and apparel exporters in Asia say consumers may feel the pinch with more expensive T-shirts and jeans.

A drought in China, floods in Pakistan and export controls in India are causing a global shortage of cotton.

India, the world's second-largest exporter, restricted exports earlier this year because of domestic scarcity. Exports are expected to resume next month but only up to 5.5 million bales, about 18 percent of this year's estimated crop of 29.5 million bales. One bale is the equivalent of 228 kilograms.

But the Indian textile industry, which employs 35 million people, wants an extended ban and higher taxes on exports because there is not enough cotton to meet demand at home.

Vinay Kotak is director of Kotak Ginning and Pressing in Mumbai, a cotton exporter.

"Prices are galloping and that's why government is a bit in the mood to delay the exports and that's affecting business," said Vinay Kotak, director of Kotak Ginning and Pressing in Mumbai, a cotton exporter. "There's an acute shortage of ready goods in India from the beginning of the year."

Cotton prices reached 15-year highs this week, above $1 for 453 grams. They have jumped more than 40 percent since July.

China, a leading cotton producer, doubled its imports in the first eight months of the year, after drought damaged crops.

This has left garment manufacturers in Asia bracing for higher costs.

Nguyen Son is vice general-secretary of the Vietnam Textile and Garments Association.

"The cost increased. That's why the Vietnamese garments and textile manufacturers also face big problem in meeting the price requirement from U.S. retailer and importer," said Nguyen Son, vice general-secretary of the Vietnam Textile and Garments Association.

Kotak, the company director in Mumbai, says he thinks any clothing price increases may be more manageable in the growing economies of Asia than in the West.

"The end-use product price increase depends ultimately on the purchasing power of the consumers. If the economies are doing well in China, India or in Asia, there's no problem. In Europe and the USA, I have my own doubts whether manufacturers of garments could pass on the price to the ultimate buyers," said Kotak.

Supply may pick up in the coming months because of an expected rise in exports from the U.S., the world's leading exporter, Brazil and Australia. U.S. cotton exports are expected to increase 29 percent from last year. However, freight charges from those countries would add to Asian garment makers' costs.

The U.S. Department of Agriculture says global cotton consumption will outstrip stocks for the sixth straight year. China, the world's biggest consumer, is expected to ramp up imports by 16 percent this year.

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