Soaring Cotton Prices Hurting Some Small Businesses

February 08, 2011 (PRLEAP.COM) Business News
2010 saw cotton prices rise to levels not see since the mid 1800's. Sparked by bad harvests and flooding in Pakistan and Australia, retailers and small businesses are bracing for higher prices in 2011, which is the last thing retailers need as the economy is just starting to show signs of life.

Many small businesses have been trying to keep their costs under control in an effort to avoid having to pass on higher costs to their customers. SC Cornhole, which manufacturers cornhole bags, uses duck canvas to make their bags and has seen dramatic increases in the cost of materials. Owner Tom Roth says, "We were shocked to see the price of our materials rise so much in a single year. Fortunately, we have made it a habit to purchase regularly in order to average out the prices increases. We've also tried to purchase larger quantities in order to secure some larger discounts. The last thing we want to do is raise prices on our customers when the economy is so fragile, so we're looking for ways to improve efficiencies elsewhere so we can absorb the rising cost of materials. For instance, we were able to lower the cost of materials for our cornhole boards, which helped take the edge off the rising prices on our canvas. We really don't have another alternative and we don't want to use inferior materials just to save some money."

For the last 20 years, the apparel industry has enjoyed relatively low-priced materials but that is set to change. A perfect storm of rising demand from developing nations and a string of bad weather in major cotton producing nations has set the table for historic prices. This is a particularly large problem for discount retailers who compete primarily on price. Analysts estimate that eventually the price increases will need to be passed onto consumers and that could result in an estimated 7-8% price increase. This is something that could be a deadly blow to an already fragile recovery for the economy.

The good news is that the outlook for cotton prices is that cotton farmers are increasing their acreage by around 15% to take advantage of the higher prices. Many analysts believe that prices will peak in 2011 and eventually come down as suppliers devote more resources to meet the demand.

SC Cornhole was formed in 2005 and quickly became the leading supplier of cornhole bags and boards. For more information on the company or their products, contact them at 708-429-6700.