retail watch | Sep 8, 2022 |
Are we headed for a cotton crisis?

For decades, cotton has been the foundation of many home furnishings products—sheets, towels, upholstery fabrics, bedding, rugs, to name a few. That could change soon … very soon.

A perfect ecological and political storm is emerging that threatens cotton’s dominance as the preeminent raw material for so many home products. A one-two punch of seriously rising prices combined with severely limited supplies is already starting to impact the marketplace, but the full effect of these changes will not be apparent until 2023. And it will be at least 2024 before there’s any relief in sight.

The same environmental factors that are taking a human toll and devastating food crops around the world are also impacting cotton fields. The impending shortage of such an essential material, one that many of us have likely taken for granted, could upend the home furnishings business in new ways over the short and long-term.

No matter where you look, cotton is in crisis. In the U.S., which is the third-largest grower of cotton in the world and the largest exporter, this year’s crop is likely to be significantly smaller due to drought in prime growing areas. The U.S. Department of Agriculture has cut its forecast for 2022 cotton production by 28 percent, the lowest level in a decade. The worst-hit area is Texas, which accounts for more than half of the country’s output. Forecasts say that could be cut by half from last year, totaling more than $2 billion in cotton. A recent New York Times article reported that many Texas cotton growers aren’t even planning to harvest large swaths of their fields due to the meager crop they will yield.

Things could be even worse in Pakistan, the fifth-largest source for cotton. The problem there isn’t too little water, it’s too much. Recent storms have produced catastrophic flooding, and early estimates are that as much as one half of the country’s crop was destroyed. Across the border in India, which is now the largest cotton grower in the world, flooding has also been a problem. A recent Quartz article found that “pests” have also destroyed crops this year, and the Cotton Association of India is estimating about a 6 to 8 percent fall in total cotton output amid reports that the country is now importing cotton.

In China, which had historically been the largest source for cotton for years but has now fallen to number two, excessive heat has been a challenge—similar to what number-five producer Brazil has faced. 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 the Xinjiang region of China, the source of as much as 20 percent of global cotton supplies—due to the alleged brutal treatment of the local Uyghur population by the Xi Jinping administration (the Chinese government denies the charges). It’s likely that products using cotton from the region are still ending up in American stores, but the restrictions are certainly adding to the global cotton squeeze.

Given these disruptions, it’s quite likely that the 2022 cotton crop, whose harvest runs from now through November, could be as much as a third less than last year’s and one of the smallest outputs 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 being reflected in cotton prices. Yahoo Finance reported that The World Bank expects cotton prices to surge 40 percent this year, and “the upward movement isn’t expected to stop anytime soon.”

“Cotton prices have soared lately,” Dennis Sweeney, president of Infinity Brokerage, told Yahoo Finance. “Availability is scarce. … [and] looking forward, cotton demand remains firm and the outlook for the coming growing season looks quite challenging.”

Cotton futures have been trading recently at about $1.08 a pound, down from their 52-week high of about $1.50 a pound, but up substantially from the trailing year low of 85 cents a pound, according to numbers from Nasdaq. By point of comparison, cotton was under 50 cents a pound at the start of the pandemic in the spring of 2020 and has generally traded in the 60 cents to 80 cents range for much of the past 10 years, according to the Trading Economics website. But this new spike is sending shivers to all the people who were around the industry in 2011, when another set of circumstances—then as much speculative as ecological—drove cotton prices up to almost $2 a pound. Prices stayed above $1 for almost a year and caused widespread shifts—not to mention panic—in the marketplace.

Many sheet and towel producers began switching their products from all cotton to cotton blends, and some to 100 percent polyester. The rise of so-called “microfiber” sheets—a great marketing name for a totally synthetic product that was inexpensive to make and often of an inferior quality—exploded, and even today, they account for a healthy share of sales in the marketplace.

The excessive cost of cotton also gave an advantage to other fibers, including cellulose-based ones like modal as well as wool, linen and even hemp, one that has persisted even as cotton prices returned more 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’s no doubt that cotton-based coverings have lost market share in the furniture segment ever since. So far, suppliers of home textiles products say they are not yet abandoning cotton products. But it stands to reason that, as demand for home furnishings continues to subside and inflation prices out some sheet and towel products, the industry will once again turn to alternative fibers. We can expect to see the larger impact of this as business in 2023 develops.

America’s love affair with cotton goes way back and was cemented by Cotton Incorporated’s famed 1989 campaign, The Fabric of Our Lives. But now it’s quite possible that relationship could be in danger of a dramatic breakup.

Homepage image: ©Aytnc/Adobe Stock


Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.

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