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Yarn Market

Shutdown Affects Cotton Price Availability; Spinners Cite Increased Cost

Jim Phillips, Yarn Market Editor

The effects of the U.S. government shutdown have trickled down to Yarn Market.

Current spot market cotton prices are not available because of lack of funding for the U.S. Department of Agriculture's (USDA's) website. Immediately after the shutdown, the following message appeared on the USDA's Agricultural Marketing Service page: "Due to the lapse in federal government funding, this website is not available. After funding has been restored, please allow some time for this website to become available again." As a result, the prices quoted in this report and accompanying price chart reflect the last published prices, which were posted on September 27. At that time, quotations for the base quality of cotton — color 41, leaf 4, staple 34, mike 3.5-3.6 and 4.3-4.9, strength 27.0-28.9, uniformity 81.0-81.9 — in the seven designated markets measured by the USDA averaged 81.38 cents per pound for the week ended Sept. 26, 2013, down 3 cents per pound from the same period in August.

However, spinners and yarn brokers say prices have trended upward again the past few weeks, primarily as a result of the lack of quality cotton at the tail end of the current crop. Here again, there is no supporting data from the USDA. "There are a number of spinners who are very tight on cotton right now, and that's sending prices up and disrupting the market," said one spinner. "But that is a short-term issue, as the new crop will be available shortly."

Other than minor nuisances, such as the unavailability of information on government websites, the effect of the Washington stalemate on private business has been minimal — at least until this point. But, spinners warn, the longer it continues, the greater the chances for a significant impact on consumer confidence and spending. And that, they say, could be devastating.

"The concern is that, as this goes on, it will have a bigger effect on consumer confidence in the economy," said one spinner. "We are just now really getting our feet back on the ground after the Great Recession. It would be a huge blow to our industry."
Most observers, however, expect a solution long before permanent ill effects emerge. "It's just posturing," said one industry observer. "I expect some movement very soon, maybe this week."

As of the middle of October, spinners were still reporting solid business conditions across multiple product lines. "My ring-spun orders have been very good, as they have been all year," said one yarn broker. "I have also been very happy with my specialty yarns business. Open-end cotton yarns have moved better recently than in quite some time. The only downside is in some polyesters, which did not pick up this year as much as I expected."

Added a Southeastern spinner: "We are still seeing a brisk business in poly/cotton blends. If the price of cotton continues to inch up, we would expect that to continue."

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Fine-Count Cotton Prices Poised To Rise?
The price of Delta cotton has remained relatively stable for most of the year, hovering in the 75- to 80-cents-per-pound range. However, recent developments in Egypt have the potential to impact the price of Pima and California cotton in the United States. "The cotton crop in Egypt is significantly smaller, and prices have jumped way up," said one international yarn broker. "This certainly has the chance to drive Pima cotton prices higher, and I think it may affect California cotton as well. It is not likely to have any significant impact on basic Delta cotton, however, unless it drives some people into Delta cottons who were previously in better cottons. But the impact on fine counts could be huge."

Further pricing impact may come from a recent development in India. The United Progressive Alliance and the Indian National Congress recently removed export benefits for cotton yarns from India's focused market scheme, fueling speculation that cotton yarn exports from India could drop by as much as 20 percent in the coming fiscal year. Latin America is one of the major focused markets for yarns from India. "This could make the cotton yarn market in the Western Hemisphere even tighter," said one yarn buyer. Right now, it seems demand and production are relatively aligned, but U.S. capacity is not nearly what it used to be. Any shortage in normal supply could result in increased prices and longer delivery times."

October 15, 2013


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