Are we heading towards a cotton crisis?
For decades, cotton has been the basis of many home furnishing products: sheets, towels, upholstery, bedding, rugs, to name a few. That could change soon… very soon.
A perfect ecological and political storm is emerging that threatens the dominance of cotton as the predominant raw material for so many household products. A sharp price increase combined with very limited supplies is already starting to impact the market, but the full effect of these changes won’t be apparent until 2023. And it will take at least 2024 before there is a relief in sight.
The same environmental factors that wreak human havoc and devastate food crops around the world also impact cotton fields. The impending shortage of such an essential material, which many of us have probably taken for granted, could shake up the furniture industry in new ways in the short and long term.
Wherever you look, cotton is in crisis. In the United States, which is the world’s third-largest cotton producer and largest exporter, this year’s harvest is expected to be significantly lower due to drought in major growing areas. The US Department of Agriculture cut its 2022 cotton production forecast by 28%, the lowest level in a decade. The most affected region is Texas, which accounts for more than half of the country’s production. Forecasts indicate that this could be halved from last year, totaling more than $2 billion in cotton. A recent New York Times article reported that many cotton farmers in Texas do not even plan to harvest large swaths of their fields due to the meager harvest they will produce.
Things could be even worse in Pakistan, the fifth largest source of cotton. The problem is not too little water, it’s too much. Recent storms have caused catastrophic flooding and early estimates indicate that up to half of the country’s crops have been destroyed. Across the border in India, which is now the world’s largest cotton producer, flooding has also been a problem. A recent Quartz The article revealed that the ‘pests’ have also destroyed crops this year, and the Cotton Association of India estimates a decline of around 6-8% in total cotton production, amid reports that the country is importing now cotton.
In China, which was historically the biggest source of cotton for years but has now fallen to second place, excessive heat has been a challenge similar to that faced by fifth-largest producer Brazil. But the real problem in China is more political than environmental, especially for the American market. The Biden administration has banned the use of cotton from China’s Xinjiang region, the source of as much as 20% of the world’s cotton supply, due to the Xi administration’s alleged brutal treatment of the local Uighur population. Jinping (the Chinese government denies the charges). It’s likely that products using cotton from the region will still find their way into US stores, but the restrictions are certainly adding to global pressure on cotton.
Given these disruptions, it is highly likely that the 2022 cotton crop, which is harvested from now through November, will be up to a third less than last year and one of the smallest productions in recent memory. (And for those of you who skipped Agriculture 101 in school, cotton is an annual crop, so any relief won’t be apparent until at least the fall of 2023.)
All of this is of course reflected in cotton prices. Yahoo Finance reported that the World Bank expects cotton prices to rise 40% this year, and “the upward movement is unlikely to stop any time soon.”
“Cotton prices have skyrocketed lately,” Denis Sweeney, chairman of Infinity Brokerage, told Yahoo Finance. “Availability is rare. … [and] Looking ahead, demand for cotton remains firm and the outlook for the next growing season looks quite challenging.
Cotton futures are recently trading at around $1.08 per pound, down from their 52-week high of around $1.50 per pound, but up substantially from the low of last year by 85 cents per pound, according to Nasdaq figures. By comparison, cotton was below 50 cents per pound at the start of the pandemic in the spring of 2020 and has generally traded between 60 cents and 80 cents for much of the past 10 years, according to the Trade economy website. But this new peak sends shivers down the spine of anyone who saw the industry in 2011, when another set of circumstances – then as much speculative as they were ecological – sent cotton prices soaring to nearly $2 a pound. Prices stayed above $1 for almost a year and caused widespread shifts – not to mention panic – in the market.
Many sheet and towel producers have started replacing their products from cotton to cotton blends, and some to 100% polyester. The rise of so-called “microfiber” sheets – a big marketing name for a totally synthetic product, inexpensive to make and often of inferior quality – exploded, and even today they account for a good share of market sales. .
The excessive cost of cotton has also given other fibers an advantage, including cellulose-based ones like modal as well as wool, linen and even hemp, an advantage that has persisted even as cotton prices returned further to historic levels.
In upholstered furniture fabrics, the cotton crisis of a decade ago coincided with the rise of performance fabrics that relied more on synthetic fibers. There is no doubt that cotton-based coatings have since lost market share in the furniture segment. So far, home textile product suppliers say they are not giving up cotton products just yet. But it stands to reason that as demand for home furnishings continues to decline and price inflation for some linen and towel products continues, the industry will once again turn to alternative fibers. We can expect to see the greater impact as business expands in 2023.
America’s love affair with cotton goes back a long way and was cemented by Cotton Incorporated’s famous 1989 campaign, The Fabric of Our Lives. But now, it’s entirely possible that this relationship is in danger of a dramatic breakdown.
Home page image: ©Aytnc/Adobe Stock
Warren Shoulberg is the former editor of several leading B2B publications. He has been a guest lecturer at Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and was quoted by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. Its Retail Watch columns offer in-depth industry insights into key markets and product categories.