By Matthew A. Ward
CARROLLTON, Va | Tue Aug 2, 2011 12:17pm EDT
(Reuters) – Last year, customers at Bella Fabrics in eastern Virginia paid no more than $9.99 a yard for the designer fabric they fashion into quilts.
But these days quilters who shop at Lisa Steele's store and others around the country are finding that their hobby has become more expensive, thanks to a "perfect storm" of events in the global cotton industry that have pushed fabric prices up to anywhere from $10.50 to $12.99 per yard.
Retailers "knew it was coming," Steele said. "When we went to buy goods (at the spring market)…we were hit with tremendous prices."
The sticker shock is the result of a number of seemingly isolated global events that led to the most significant spike in cotton futures since the Civil War, according to John Robinson, a Texas A&M University agricultural economics professor who runs a website on cotton marketing.
Three to four million bales of cotton were lost in Pakistan's devastating floods that began in July 2010, he said. Then last August, Russia temporarily banned wheat exports due to drought, causing speculators to start buying not only wheat but also corn, soybeans and cotton.
A lackluster monsoon in India and a cold, wet cotton harvest in China also were contributing factors, he said.
"But the real kicker was that, some time in about October, the official analysts (the U.S. Department of Agriculture) concluded that because prices in China were rising so much, it must be — they just made this big inference — that they had less cotton on hand," he said.
Robinson said this "perfect storm" created "an honest-to-gosh panic on the part of commercial buyers — textile mills, mainly — and they bought up everything in sight at whatever price."
Domestic production issues including hail storms in Texas also spurred the speculators, said Larry Siebl, an Oregon-based sales executive for fabric wholesaler E.E. Schenck Company.
The resulting spike in fabric prices was stunningly abrupt, he said.
"It jumped up so fast that a lot of the quilt shops initially thought it was gouging by their stores, and the stores thought it was gouging by the wholesale distributors like ourselves," he said.
"I've heard stories where earlier this year, consumers were at a trade show and they said, 'Let's buy it now, before it goes up again.'"
Facing higher prices, Fran Jones, a 59-year-old quilter in Smithfield, Virginia, said she lately has been drawing on her own stocks of fabric and going online to compare prices when she has had to buy.
"Right now we don't have any money problems, and I enjoy what I do so much," she said. "I guess if it went up another 20 percent I would probably slow down and use what I've got and wait for the prices to come down again."
Steele, who said skyrocketing credit costs during the recession had posed a greater challenge to her business than the spike in cotton prices, remained upbeat that customers would keep shopping at her quilting store.
"Quilting is golf for women — you don't take this up unless you are prepared to spend a little bit of money," she said.
As for the future of cotton prices, Robinson said he doesn't expect a repeat of all the factors that came together in 2010 to push costs upward.
"Will cotton prices get back to normal if normal is the 70, 80 and 90 cent (per pound) range? I think so," Robinson said, citing foreign and American growers planting more cotton to reap the current price bonanza. "I think two or three years out, yes, they will."
Siebl said time will reveal the overall impact of higher prices on quilters, who generally take time off in the summer before surrounding themselves in their craft rooms or on their dining room tables with new projects in the fall and winter.
"Maybe a year or so from now, in hindsight, we'll have a better idea of what took place," he said.
(Editing by Colleen Jenkins and Greg McCune)