Build your professional network on facebook via our app Go to app
 
 
 
The end of cheap clothes is near by V.S Ganesh, CEO/MD/Director, Bannari Amman Apparel (P)Ltd;

The end of cheap clothes is near

By : V.S Ganesh, CEO/MD/Director, Bannari Amman Apparel (P)Ltd;
Industry : Textile Functional Area : Global Business
Keywords :

Cost

Price

End

Market Trend

Near

Apparel

Cheap

Clothes

Activity:  5 comments  440 views  last activity : 07 06 2010 20:18:04 +0000
 Refer 31
Share
 
 
 
The end of cheap clothes is near
By Jorn Madslien
Business reporter, BBC News

Food prices have shot up in response to a surge in crop prices. Now consumers should get ready for clothes prices to follow suit. Garment makers are seeing demand shrink as consumers in the US and Europe are cutting back on spending. US cotton consumption is set to fall 6.5% from last year to less than a million tonnes whilst EU consumption is expected to fall 11% to about 460,000 tonnes, the Economist Intelligence Unit (EIU) predicts. At the same time, they are hit by more expensive raw materials and by soaring oil prices, which make their factories more expensive to operate and which pushes up the cost of shipping to foreign markets. In India, the weaving industry is in crisis. In China, the textile sector is squeezed. And, yet again, the root cause of their problems can be found in America. US markets
 Cotton prices 2008/09 - 80 cents per pound (projected) 2007/08 - 74 cents per pound
Source: ICAC
In the US, ever more cotton farmers are switching to more lucrative crops - soybeans, corn, and wheat - whose market prices are rising even faster. The prices of these crops have been pushed higher by a mixture of subsidies, growing demand from biofuel producers and market speculation. "Cotton is taking its cue from whatever the other [commodity] markets are doing," according to a US commodities broker. "They set the tone for a lot of the things taking place in this market." Costly cotton As a result of the shift by farmers, "the cotton harvested area in the USA is projected to decline by a further 15%" in the year ahead, predicts the International Cotton Advisory Committee (ICAC). That would bring the cotton acreage in the US to 9.5 million acres, down from 10.8 million in 2007 and from whopping 15 million acres in 2006. "It is obvious that [cotton] prices will be higher," ICAC says. This year, global cotton prices are set to rise more than 8% to 80 cents per pound, ICAC predicts. Financial market professionals think the rise could be even steeper. May cotton futures currently trades at about 71 cents per pound on the Intercontinental Exchange, or ICE. The December futures trade at about 83 cents per pound. "I don't think we've had markets this wild since 1995, and we're in an environment where it could be with us for several years," says Mike Stevens from finance house Swiss Financial Services in an interview with Penton Insight. Demand outstrips supply Cotton shortages first emerged last year, when global demand for cotton exceeded global supply by about a million tonnes. In spite of the US shift towards competing crops, this year, the global cotton harvest is set to grow 3%, as major producer regions such as China, India, Australia, Brazil and West Africa are raising production. Globally, supply growth is thus outstripping demand growth; cotton mill use is set to grow by just 1% this year. But even so, supply is not growing fast enough. This year's production level is expected to peak at 26.9 million tonnes of cotton, compared with demand for 27.5 million tonnes, the ICAC predicts. Expensive clothes But costly cotton is only one factor hitting clothing manufacturers. "It all comes down to energy," explains Bradley George, head of commodities and resources at Investec Asset Management. "We are basically short of power in the world right now." Hence, it is not only a question of whether land should be used to grow crops for food or cotton. It is also a question of how much energy should be used to produce clothes in factories. Fertiliser costs are also soaring, adding to raw material costs, and the credit crunch is adding to the squeeze as low-margin clothes manufacturers are finding it harder to raise finance. The wages paid to factory workers have risen too, especially in China. Manufacturers in India and China, as well as in many other parts of South East Asia and Central Asia are already feeling the pain. In the end, they will either have to raise prices for the clothes they make, or go under - which in turn will reduce supply. For consumers in Europe and the US the outcome is certain: prepare to pay more for clothes in the years to come.
 Top Comment : Sathya Narayanan Nandakumar   | 04 28 2008 07:40:11 +0000
Hi Ganesh Trust you are doing well. It's quite interesting to see the number's about Cotton and hard to digest. At the end of the day, all these will have a direct effect on the common man. Regards Sathya.
go to top
 
TrackBack URL:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7362343.stm
5 comments on "The end of cheap clothes is near "
Sort by: Most Recent Top Rated
  Commented by  ravi kishore, Freelancer, Freelancer ; Faculty Bangalore University    | 03 03 2010 15:43:28 +0000 
Yes for the West. Opportunity for the domestic players. With domestic consumption pegged at over 100 million considering at 10% of India's population of 1147 million. At least half this number needs cheap clothes the price at which most of our exporters were shipping out to the likes of JCP, WalMart, K-Mart. In any case what price our exporters are shipping any way? Not exceeding USD 8.00 ave which is about INR 400 per pant and INR 300 per shirt. End for the West must be a boon to the domestic consumer.
  Commented by  ravi kishore, Freelancer, Freelancer ; Faculty Bangalore University    | 03 03 2010 15:43:08 +0000 
Yes for the West. Opportunity for the domestic players. With domestic consumption pegged at over 100 million considering at 10% of India's population of 1147 million. At least half this number needs cheap clothes the price at which most of our exporters were shipping out to the likes of JCP, WalMart, K-Mart. In any case what price our exporters are shipping any way? Not exceeding USD 8.00 ave which is about INR 400 per pant and INR 300 per shirt. End for the West must be a boon to the domestic consumer.
  Commented by  Adarsh Ram Varadarajan, Manager - Planning & Merchandising Intimate Fashions    | 07 01 2008 22:52:47 +0000
Rating : +1  
Probably the retail margins have to reduce in order not to affect the end consumer plus keep the clothing industry alive in the developing world. And the world will definitely need to look at viable synthetic alternates to cotton , as more farms the world over need to produce food grains first for the ever growing population and also deliver to bio-fuel needs which is also very important.

Cheers ,

Adarsh Ram
  Commented by  Sathya Narayanan Nandakumar, Manager -Operations, Hewlett-Packard India    | 04 28 2008 07:40:11 +0000
Rating : +1  
Hi Ganesh

Trust you are doing well. It's quite interesting to see the number's about Cotton and hard to digest. At the end of the day, all these will have a direct effect on the common man.

Regards

Sathya.
Add your comment on "The end of cheap clothes is near "

Rate:
Submit
 Found the article "The end of cheap clothes is near "  interesting ?  Share with your connections and communities  
 
Viewers also viewed
Citizens in Egypt, Yemen, Jordan, Syria, and Sudan, frustrated and tired of the autocrats who...
 
512 referals 3 arguments, 66 views
Whenever you go for buying anythingthe first thing you see is the quality and then the price. A...
 
854 referals 20 arguments, 236 views
This is a general question we generally hear about us. Indian's, as the world knows are the...
 
796 referals 108 arguments, 1861 views
more...  
Recent Knowledge (253)
Understanding client’s needs holds in itself the key to run a successful and sustained business....
 
1 referals 3 comments, 11 views
The Tata people have done some commendable job with regards to the online promotion of the car...
 
124 referals 13 comments, 1401 views
Clock ticking for exporters-DEPB withdrawal CAUSE and Effect of DEPB withdrawal DEPB stands for...
 
0 referals 1 comments, 10 views
more...  
Sponsored Jobs
More From Author
Good one Varsha, thanks for sharing. Cheers.
As part of a new LEI research project on lean management, I have been visiting with a number organizations well along in lean transformations. I ask the leaders of these initiatives about their methods, their experiences to date, and their...
The end of cheap clothes is near By Jorn Madslien Business reporter, BBC News Food prices have shot up in response to a surge in crop prices. Now consumers should get ready for clothes prices to follow suit. Garment makers are seeing demand...
more...  
  • Popular Knowledge
  •  
  •  
  • Popular Jobs
  •