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Cotton futures soared 4% to near $ 1.09, the highest level since September 2011. The commodity is up 22% in the past two weeks alone.
The cotton tip could eventually be passed on to consumers in the form of higher prices on jeans, T-shirts and other clothing.
Consumer prices for clothing were already on the rise and the resumption of cotton futures could push prices even higher.
Clothing prices climbed 4.2% in the 12 months ending in August, according to the government’s inflation report. Prices increased further on men’s shirts and sweaters (4.4%), men’s pants and shorts (6.6%) and women’s dresses (11.9%).
Analysts blamed the cotton recovery on several different factors, including extreme weather conditions. Droughts and heat waves wiped out cotton crops in the United States, the world’s largest cotton exporter.
“It’s a scarcity situation. The planting season hasn’t gone very well,” said Robert Yawger, director of energy futures at Mizuho Securities.
Yawger said traders on Wall Street have pushed cotton prices up even more in recent days.
“All the speculators have started to intervene, exacerbating a tight market,” he said.
At the same time, demand has been very strong, especially from China. Strong demand from China may reflect a side effect of US trade policy.
In December 2020, the Trump administration blocked U.S. companies from importing cotton and cotton products from China’s western Xinjiang region over concerns about forced labor.
Analysts say these sanctions, which remain in effect during the Biden administration, have caused some Chinese companies to buy cotton grown in the United States, make products with it, and then resell the products in the United States and on d ‘other markets.
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