The increases in cotton fibre prices which occurred between August 2010 and August 2011 were steeper than at any time since records began. Moreover, because the movements were unprecedented, no one knew for certain how much, or how quickly, those increases would affect the prices of yarns, fabrics and apparel in the manufacturing supply chain, and the prices which consumers would have to pay for apparel items in retail stores. Now that cotton fibre prices have fallen to levels which are closer to historical averages, there are enough data to address these questions and start to build models which can be used to make predictions of this "pass-through" effect in the future. The price of cotton fibre peaked in March 2011 at a level which was 154% greater than in August 2010. The yarn price peaked at the same time but at a level which was only 67% greater. At the garment stage, the average price of cotton-dominant imports arriving at US ports peaked about seven months later, in September 2011, at a level which was 25% greater. Since then, the average price of cotton-dominant apparel imports has declined, and by June 2012 it had fallen to a level which was only 13% higher than in August 2010. By contrast, average retail prices of apparel continue to edge higher. As of July 2012, the US consumer price index for apparel was almost 7% above its August 2010 level and had yet to reach a definable peak Although the cotton fibre price has moderated considerably—by July 2012 the Cotlook A Index was 63% lower than its peak in March 2011—prices can be expected to remain volatile. Strategic planners will therefore continue to need a method of predicting the timing and extent to which future changes in the cotton fibre price are likely to affect their business.
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