THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, April 21, 1995 TAG: 9504210482
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY SCOTT THURM, SAN JOSE MERCURY NEWS
LENGTH: Medium: 69 lines
Pests are loose in the cotton fields of Asia, and you'll soon feel it in the shorts - the price of shorts, that is. Cotton prices are soaring, the result of worldwide shortages, combined with booming demand for cotton shirts, pants, sheets and towels. A pound of cotton that last October sold for 65 cents peaked at $1.15 in early March before settling more recently near $1.
That's a boon for cotton farmers - including growers in Virginia - and U.S. taxpayers, who probably will save about $1 billion in crop-support payments this year. But costlier cotton ultimately means higher prices for consumers who buy an estimated $50 billion of cotton garments and furnishings each year.
Already, Fruit of the Loom says it has increased underwear prices by an average of 6 percent since last July, largely because it's paying more for cotton. Other manufacturers are more circumspect, but analysts say they have increased or soon will increase prices as well.
``It's a big battle as to who eats the higher cost of cotton'' among manufacturers, retailers and consumers, said New York retailing analyst Edward Johnson. ``A certain amount is going to be passed on to you. . . . You'll gradually be paying more for your jeans.''
The price of jeans won't go up anywhere near as steeply as the price of cotton for several reasons, analysts say. First, cotton makes up only a small fraction of the cost of garments; a $25 shirt may contain a pound or two of cotton, which even now costs less than $2. Second, big cotton users generally avoided the highest prices because they buy with long-term contracts.
Analysts say cheaper goods like underwear are more likely to increase in price than expensive designer sweaters. That's because cotton accounts for a higher percentage of the cost of underwear, and there are much smaller markups to cushion the impact.
``It's not that big a deal,'' said Ernest Simon, a cotton analyst for Prudential Securities in New York. ``It has been passed on, and I don't think the consumer even noticed it.''
Cotton costs more today than a year ago because of the simplest economic concept - supply and demand. It accounts for 57 percent of the fibers that go into American clothes and furnishings.
Supplies of cotton fell last year because pests damaged crops in China, India and Pakistan, the world's three largest producers aside from the United States. With prices high and demand strong, U.S. farmers are expected to plant 15 percent more cotton this year.
Two years ago, Virginia growers - who mostly farm in the southeastern part of the state - planted 23,200 acres, according to Kevin Harding at the Virginia Agricultural Statistics Service.
That cotton acreage nearly doubled in 1994, and the projection for this year is that 95,000 acres of cotton will be planted, Harding said. Last year's production of 79,200 bales - 480 pounds to a bale - brought in about $26 million for the state's farmers. ILLUSTRATION: Color photo
JOHN H. SHEALLY II/Staff file
Virginia has three cotton gins, including this one in Windsor. On
Wednesday, Suffolk officials approved the construction of a fourth
to be built in their city.
Graphic
TOP COTTON-GROWING COUNTIES IN VIRGINIA
[For complete graphic, please see microfilm]
by CNB