Brighter Future for Cotton Textile Makers

The folks that bring you towels, sheets and other items made of cotton have been hammered this year by high cotton prices and Asian imports. But happy days may be around the corner.

As recently as two years ago, a pound of cotton could be had for as little as $0.49. A year ago, cotton prices still were only about $0.70 a pound. But bad weather, crop infestation and political and economic upheaval in Pakistan, China, India and Uzbekistan, all leading cotton producers, sent prices soaring. In February, cotton traded for as much as $1.00 a pound. Like oil at $50 a barrel, gold at $850 an ounce and coal at $100 a ton, cotton couldn't stay at this price forever. Cotton farmers in the U.S. and abroad have sharply increased acreage and cotton consumption has trailed production for three successive years. Those trends have already brought the price of cotton down to about $0.83 a pound.

Another problem that U.S. textile makers are confronting and overcoming is high labor costs. There's no way U.S. textile companies can compete with cheap labor countries, such as China. Instead more and more companies are investing in efficient plant and equipment and shedding workers in the process. The result? Revenues per employee increased to $91,500 per worker today from $55,755 in 1980. The new equipment allows textile makers, such as Guilford Mills, to rapidly change production to cope with sharp changes in fashion and buying trends as well.

At the same time, companies, such as Fruit of the Loom, are shifting production to low-cost locales, including Mexico.

Bottom line: lower cotton prices, new equipment investment and foreign production will help U.S. makers of cotton textiles, such as those above and Cone Mills, Springs Industries and Westpoint Stevens, compete with Asian imports.

Related Links: