Flashback to 1870 as Cotton Hits Peak

Cotton prices touched their highest level since Reconstruction on Friday, as a string of bad harvests and demand from China spark worries of a global shortfall. The sudden surge in prices—cotton has risen as much as 56% in three months—has alarmed manufacturers and retailers, who worry they may be forced to pass on higher costs to recession-weary consumers. The December cotton contract hit $1.1980 a pound minutes after the opening of trading on the IntercontinentalExchange on Friday. It is officially the highest price since records began back in 1870 with the creation of the New York Cotton Exchange. The Mississippi Historical Society has its own records that show cotton was changing hands at $1.89 a pound during the middle of the Civil War, which lasted from 1861 to 1865. In the early stages of the war, the South halted exports in a failed attempt to draw Europe to its defense. Then later, the North imposed a blockade, crippling the South's ability to ship cotton to Europe. The U.S. was then the largest cotton producer at the time and the halt led to what was dubbed the "cotton famine." "I've seen a lot of big moves, and this exceeds everything," said Sharon Johnson, senior cotton analyst at First Capitol Group, a financial adviser. "It's not something you're going to see again in your lifetime.". The cotton surge is part of a broad-based commodities rally since the beginning of the year, underpinned by fears over a weakening dollar, healthy demand from emerging markets and various weather-related supply disruptions. Along with cotton, prices of so-called soft commodities such as sugar, orange juice and coffee all have soared, adding to concerns that consumers might soon be paying higher prices for daily necessities. For the apparel industry, rising prices have upended roughly two decades of cheap cotton. Consumers have become used to relatively low prices, making it hard for garment producers to pass on the rising costs, especially as the economy struggles to recover...more