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Raw Materials Outlook a Mixed Bag

NEW YORK - No one has a crystal ball, but anticipating the cost of production can be the difference between success and failure in any industry. While cotton prices have stabilized, other raw materials important to home textiles production are experiencing upward pressure - for a variety of reasons.

COTTON
Few can forget the unprecedented price spike in 2010/2011 that sent all home textiles raw materials prices decidedly upward. Many fingers were pointed; many villains sought, but cotton now seems to be among the more stable materials used in home textile construction. Jon Devine, senior economist, Cotton Incorporated, told HTT the "best cure for high prices is high prices."
     Elaborating, Devine said, "In response to the record prices in the spring of 2011, the world's cotton farmers planted a record volume of cotton. In addition, order volumes decreased. The combination of higher supply and lower demand lead to a large increase in warehoused supply. This additional supply has pulled world prices much lower. Meanwhile, Chinese prices have been stable at high levels due to the government guarantee."
     For the 2012/2013 crop year the USDA's January 11, 2013 World Agricultural Supply and Demand Estimates (WASDE) offered this analysis: "This month's world 2012/13 estimates shows higher production and slightly lower consumption, resulting in ending stocks of 81.7 million bales. Production is raised mainly in China, where recent levels of cotton classings and purchases for the national reserve indicate that the crop is larger than previously estimated."
     Blame for the 2010/2011 cotton price spike often turns to China, but Devine noted, "At the same time that the world's cotton harvest was getting successively smaller, the global recession hit. This pulled consumption (mill-use, the consumption that transforms fiber into yarn) lower and prevented prices from increasing sooner than they did."
     Devine suggested cotton consumers keep an eye on corn and soybean prices, as recent increases in these commodities may crowd out cotton acreage and put upward pressure on cotton prices generally.
     The Supima Association of America reported in its January 2013 newsletter that American Pima prices have seen a slight increase over last month while foreign extra long staple and long staple prices have remained stable. "The USDA updated their production estimates for American Pima to be 759,900 bales for the season," the association reported.

POLYESTER
While cotton prices impact the cost of production for almost all home textiles, other raw materials may be affected by their own unique influences. In the case of polyester, oil can dictate what home textiles producers will pay for poly products.
     Alasdair Carmichael, president of the Americas for PCI Fibres, said that while oil is a key driver in the price of synthetic fibers there are a number of other supply/demand influences on the price of polyester.
     "During Q3 and Q4 of 2012 polyester prices have increased approximately 11% (July to December) while oil was flat. This increase was driven by a tightness in supply of Paraxylene a key raw material ingredient to produce polyester, so this was a petrochemical supply/demand driven increase," he explained.
     January 2013 oil prices have increased by approximately $8 to $10 per barrel, he said, and further price increases were anticipated for February.
     Going forward, Carmichael expects polyester pricing to stay firm for the first half of 2013. He believes the tightness in Paraxylene will continue. "There is some additional capacity coming into production around the middle of the year, but it is not until late 2013/early 2014 when we will see enough new Paraxylene production starting up to create a significantly easier supply/demand balance," he said.

FEATHER AND DOWN
One might attribute higher feather and down prices to some kind of supply disruption, like the severe 2012 drought in the U.S. killing off poultry, but Stephen Palmer, president, American Down and Feather Council tells it differently. "No single weather event in any one country will determine down and feather prices. It's a global market. Feather and down trade like commodities," he said.
     What's currently driving price increases, according to Palmer, is a global boom in outdoor products such as down jackets and sleeping bags. Down is very fashionable in China right now, especially the demand for down jackets, which he described as, "huge."
     Palmer also told HTT the cold winter in China as well as a longer selling period for Chinese New Year this year, which is akin to the Christmas holiday selling season, means that prices will likely continue on an upward trend.
     "Prices have been up in the last 12 to 18 months. Goose down prices have risen 150%, reaching an historical high. Duck down prices are up 100%, a near historical high."
     While the market shows no indications of price deflation, Palmer believes the worldwide supply is relatively stable for now.

WOOL
Increased wool prices spring from both sides of the supply and demand relationship.
     "Pressure on wool prices comes not only from low supply currently, but also higher demand, for example in Eastern Europe, where growing incomes are increasing the demand for lamb meat," according to Bob Christnacht, division manager for home and director of sales for Pendleton Wool.
     He said that wool prices did not recede to pre-cotton-spike levels and are still up from a few years ago.
     The supply side problem stems from the fact that international sheep flocks are at a 30- year low.
     "Unlike other commodities, wool can't just be grown or manufactured," he noted.
     The net on sheared wool averages $16 per sheep - "but a lamb for slaughter will net around $100," he said.
     Herders' need for diversification as well as the natural demand to produce more livestock keeps the wool coming, albeit at higher prices, which Christnacht sees no sign of receding - especially with demand side strength in the outdoor category.

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