Cotton Tests 1995 Peak as Supply Drops, Levi's Raises Prices

Bloomberg,

Cotton may climb to the highest price since 1995 as rising demand in emerging markets for everything from shirts to bed sheets forces textile makers to restock inventories that are the tightest in 13 years.

Export sales by the U.S., the largest shipper, are off to their fastest start since 1993 as apparel demand in China, the biggest consumer, increased 24 percent, government data show. Cotton may advance 13 percent to a 15-year high of 94.9 cents a pound before new supplies are harvested in October, according to 17 analysts surveyed by Bloomberg on Aug. 12 and Aug. 13.

The commodity is projected to extend its gains because demand is growing in Asia’s developing nations, even as signs emerge that the U.S. economic recovery may slow. While the rally is enriching some cotton investors, it’s also boosting costs for Levi Strauss & Co. and Hanesbrands Inc., the maker of Hanes underwear and the Wonderbra. The last time cotton traded above 90 cents a pound, in 2008, some merchants including Paul Reinhart Inc. were forced into bankruptcy.

“Global consumption is exploding,” said Ron Lawson, a managing director at Logic Advisors, a commodity consultant in Sonoma, California. “We just can’t get enough cotton in place to meet the growing demand.”(more)