Cotton prices have recently reached record highs and have begun to cause some clothing retailers problems. Many European clothing stores import their cotton from various countries in Asia, so they are often at the mercy of their suppliers. China and India are two of the top producers of cotton in the world, and they have recently undergone some industry changes that may lead to lower profit margins for their European buyers.
India is becoming a global superpower in various different industries, cotton being one of them. As one of the largest cotton producers in the world they hold a lot of power in the current highly competitive market. They have recently been limiting their exports of cotton in hopes of boosting their local apparel industry. This is good news for Indian retailers, but European retailers cannot say the same. It has these caused foreign retailers to panic a little and has actually had a huge effect on the global price for cotton.
In addition to a low supply and a high demand for cotton, the labor wages in the industry have increased significantly. Many smaller countries that are large producers of cotton have experienced worker strikes due to low wages. This has been apparent in China and has also affected countries where clothing is often produced for Western retailers such as Bangladesh and Cambodia. After these strikes, wages have been increased for these workers. With these higher wage demands from workers, cotton and apparel prices will continue to rise. Low-cost retail stores are especially struggling to keep their prices competitive while still getting all of the necessary materials.
India’s current policy of a yarn export cap has caused foreign retailers to struggle, but in the next few days decisions will be made that may allow more cotton to leave the country. If they ease their limit, it will have a huge effect on the global cotton market. European retailers are crossing their fingers that cotton exports from India will increase soon.