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Tuesday, June 14, 2011

Editorial: The Effect of Cotton Prices on Licensing Art to the Textile Industry

The price for cotton has jumped over 250 percent in the last year. The cost in April 2010 was $0.88 per pound and went to an all time high of $2.30 per pound in March 2011. And even though the prices are decreasing ($1.65 in May 2011), analysts do not expect the cotton prices to again reach the low 2010 values. Below is a discussion on the reason why cotton prices have increased so dramatically, the impact it has on the retail prices of textiles (fabric, cloth),* and ultimately the impact it has on licensing art to the textile industry.

*Read the definitions and subtle differences of textile, fabric, and cloth in Wikipedia.

Surge in Cotton Prices
The 2010 surge in cotton prices was because of a global cotton shortage. This shortage was caused by a variety of events such as lower cotton production, loss of cotton crops, higher energy and labor costs, weakening U.S. dollar, and placing export quotas on cotton in India while the demand for textiles and cotton products rose (mainly in China). In 2009, the switching of cotton production to other crops that were more profitable than cotton started the impetus for escalating prices in the U.S. It was followed in 2010 by loss of cotton crops due to bad weather in Pakistan (flooding), China (drought) and India (monsoon) that affected one quarter of the global cotton crop. And the multitude of events and reasons for the cotton shortage goes on. To find out more, read Textile Forecast: "High Cotton Prices: How Did We Get Here?"

Impact at Retail
Most manufacturing of textiles takes place in mills around the world and not in the U.S. Because the U.S. textile industry is small, it exports much of the cotton it produces and imports most products that contain cotton from other countries. China is the largest producer and consumer of cotton. To find out more cotton information and statistics, read "Cotton" sponsored by E*Trade.

Last year, there was no significant increase in textile prices because manufacturers* either still had the cotton that was purchased at lower prices or they absorbed the higher cotton cost. They were worried that their customers would not pay higher prices. And they were right because earlier this year India cut their textile production because of the sinking demand for cotton.

Some manufacturers will offset the higher cost of cotton by reducing the cotton content in the products by introducing other materials such as a polyester for a poly-cotton blend or even switch to other materials like Lycra. But the higher costs of cotton will eventually be passed onto consumers so manufacturers and retailers can maintain a profitable gross margin (difference of cost to produce product or cost at wholesale, and income from sale of product). Read the following articles for additional information.

• from CNN Money: "Cotton prices heat up this summer"

• about bath textiles: "Rising Costs a Concern For Bath Textiles Suppliers"

• about scrubs: "What's Up With Cotton Nursing Scrubs?"

• about quilt fabric companies: "What's Up With Cotton?"

* In the licensing industry, many companies that are called manufacturers do not actually manufacturer their products but outsource them to companies that produce the products. Thus, they are really suppliers of products and not manufacturers.

Impact on Licensing
Not all textile products use licensed art. But pillows, throws, scrub clothing, fabrics for quilting, kitchen and bath textiles, rugs and mats, needlework kits, etc. use licensed art somewhat. And unfortunately, the rise in cotton and labor costs are bound to affect licensing art for those products.

At Surtex, I heard several artists and an agent say that the amount of licensing deals for kitchen textiles is down from previous years. They attune it to the escalating costs in producing textiles. Manufacturers gross margins are smaller and they are looking for ways to cut costs so that they do not have to increase the price beyond the point consumers are willing to spend. One method of cost savings is not to license art but to either buy the art outright or not put art on some textile products.

The drop in sales of cotton fabrics with the rising cost has already impacted the quilting industry as many consumers are reluctant to pay over $10 a yard. Quilters are no longer willing to purchase huge amounts of fabric to add to their fabric stashes for future projects. They are either buying just enough for an immediate project or using fabrics from their existing stash that was purchased years ago.

The Future
In the long run, the reduction in textile sales will affect manufacturers. It could cause those manufacturers that license art to go out of business and give artists less licensing opportunities. It sounds gloom and doom doesn't it?

Well, artists that design mostly for the textile industry can wait and see if the prices come down as the economy improves or they can be proactive. Be proactive by creating designs or convert existing ones (if suitable) for other industries such as the paper industry (journals, greeting cards, scrapbooking, party, etc.). And for those artists that only create patterns, take that extra step and create central images that complement the patterns. That will give additional opportunities for licensing art to more industries.

Most of all, work harder at creating art than you have ever worked before. Artist Paul Brent stated during his May 25, 2011 "Ask Paul Brent" call with Tara Reed** that the poor economy has definitely impacted the amount of his licensing contracts. So what did Paul do? He worked harder and created an impressive 40 art collections last year (30% more than normal) so that he will have a better chance in licensing his art this year. As he said, licensing is a volume business and the more good art you have the better your chances in getting licensing deals. Kudos Paul! You are a true PAL (Positive Art Licensor).

** A downloadable audio file of the May 25, 2011 "Ask Paul Brent" call that answered artists licensing questions and discussed Surtex 2011 can be purchased at ArtLiceningInfo.

I welcome any suggestions and comments. Please write them in the comment section below.

1 comment:

  1. Wow, I hope the western economy pick up soon. I've been planning to go into art licensing for almost a year.