The Drop In Cotton Prices Has Also Worried Clothing Manufacturers.

The news of July 23rd has jumped to a record high this spring.

Bloomberg News, a farm in Brazil is harvesting cotton.

For garment manufacturers, this is a reversal of the situation.

They struggled to cope with the rise in production costs last year, worrying about the extent to which additional costs would be passed on to consumers (if possible).

And clothing retailers now want to know whether the decline in cotton prices can be maintained, or whether the rise and fall of cotton prices will continue.

Cotton prices are now down 53% from their peak in March 4th.

The world's largest

By the end of next spring, the decline in cotton prices will not be reflected in the retail price of textiles.

But clothing companies will have to decide in the coming months whether they will keep the price of T-shirts and jeans at a higher level.

VF Corp., which produces Lee and Wrangler jeans, hopes that the price being adjusted can be maintained.

Wiseman said that the ideal result is that we will be able to maintain the current price level and recover lost territory in gross margin.

Over the past year, the sharp fluctuations in cotton prices are particularly evident.

Driven by strong harvest and strong market demand in Asia, cotton prices doubled more than last July to March this year. Cotton exchange settlement in March hit the highest level in 140 years at $2.1515 a pound.

Since then, cotton prices have fallen all the way, and so far the decline has been more than 50%.

In the Intercontinental Exchange, cotton futures for December were closed at 98.63 cents a pound on Wednesday.

The surge in cotton prices at the end of last year forced the clothing companies to think about the strategy.

Kaare Oeri Christian Callieri, head of consumer and retail operations at A.T. Kearney, a management consulting firm, said they could choose to raise their prices or choose to digest their price factors at the expense of profit margins. They could also choose to adjust their production processes, use less expensive textiles or reduce clothing decoration.

Clothing companies specializing in the production of T-shirts and jeans and other low priced goods are most likely to be hit by the fluctuation of cotton prices, because raw material costs occupy a larger share of their total cost.

Underwear manufacturers such as Hanesbrands Inc., Fruit of the Loom Inc. and Jockey International Inc. are especially stressed.

For the production of a finished garment, the proportion of cloth to its cost can reach up to 60%.

Hanesbrands has raised its price this year and plans to raise its price again in the fourth quarter.

Rich Noll, chief executive of the company, said the company is consulting with retailers on how to deal with the pricing issue in the second half of 2012.

One of the options before them is to increase the number of packages, such as adding a pair of underwear, while maintaining a higher price.

Noel said, fundamentally speaking, the impact of the decline in cotton prices has been offset.

According to cotton traders, many foreign textile mills that have purchased cotton during the rapid rise in cotton prices are now competing to cancel the contracts. They can no longer afford to pay the original price due to reduced demand.

China's largest cotton consumption country released data in June, indicating that China's cotton imports fell by 32% over the same period last year, which confirms the market's fear of weak demand.

In its latest monthly report, the US Department of agriculture lowered its export expectations for us cotton sales for the year July 31, 2012 to 8%, down to 12 million bales.

In the year of sale in July 31, 2011, US exports of cotton were estimated at 14 million 500 thousand bales.

The spinning mill that makes raw cotton into yarn is in a dilemma.

T. Jordan Lea, chairman of Eastern Trading Company, a cotton merchant in Green, South Carolina, said that because the price of yarn is more severe than cotton prices, many spinning mills prefer to buy Yarns directly for textile mills.

As a result, Cotton Traders encountered a lot of cancellation of contracts. Even those who could not afford to pre determine cotton prices or no longer needed cotton or even default appeared in Indonesia and Bangladesh.

Li said that this poses a great challenge.

Kurabo Industries, Japan's representative of Ippei Industries, said the company would not cancel the contract.

But Kurashiki's textile industry is also affected by fluctuations in cotton prices.

He said corporate profits are declining.

Because the company purchased raw materials three months in advance, its stock of cotton remained at $2 per pound, but it did not raise prices too much because of competition with lower priced textiles in China.