The cost balance between cotton and polyester is being recalibrated by crude oil. Brent crude settled above $100 per barrel, the highest since late May, and ICE December cotton promptly rebounded 0.96 cents to 87.28 cents/lb, a gain of 1.11%, pulling away from the prior session's three-week low of 85.56 cents. For downstream spinners and fabric buyers, this spread shift means the cost-effectiveness of fiber substitution is being recalculated in real time.
Cost Transmission: How Oil Rewrites Fiber Competition
Polyester's core feedstocks, PTA and MEG, are deeply tied to crude prices. Each step up in oil lifts polyester staple fiber production costs, while cotton, as a natural fiber, is not directly driven by crude. This structural difference means the spread between the two naturally narrows during oil upcycles. When crude breaks the $100 mark, polyester's cost advantage is significantly eroded, and textile mills adjust their cotton blending ratios accordingly.
Meanwhile, the dollar index slid to a near two-week low. Dollar-denominated commodities became cheaper for overseas buyers holding other currencies, stimulating international inquiry interest to some extent. The Cotlook A Index stood at 96.10 cents/lb, up just 10 points, with spot market gains limited, suggesting buyers remain on the sidelines awaiting clearer directional signals.
Supply-Demand Tug-of-War: Falling Ratings vs. Brazilian Bumper Crop
The USDA's latest crop progress report showed US cotton good-to-excellent ratings fell to 34% for the week ending September 6, down from 39% the prior week and sharply below 54% a year earlier. Harvesting stood at 7%, matching last year and slightly above the five-year average of 6%. The persistent decline in ratings implies suppressed yield potential for the new crop, offering some downside support for prices.
Yet bearish supply factors cannot be ignored. Consultancy Agroconsult raised its estimate for Brazil's 2025/26 lint cotton output to a record 4.5 million tonnes, up about 300,000 tonnes from its previous forecast, citing improved yields from field surveys. Brazil's continued production growth is reshaping global cotton trade flows and poses medium-term pressure on US export share. With mixed factors at play, ICE deliverable No. 2 cotton stocks held steady at 54,414 bales, leaving the market short of incremental drivers.
Event Focus: USDA Report Becomes the Short-Term Pricing Anchor
Market attention is now concentrated on the USDA's upcoming World Agricultural Supply and Demand Estimates report. The report will provide the latest US and global cotton balance sheets, and traders need it to gauge actual supply volumes from the Northern Hemisphere harvest and whether recent price weakness has fully priced in bearish factors. Before the release, the tug-of-war between support and resistance levels is likely to persist.
For China's textile industrial belts, external cotton price fluctuations transmit to the yarn sector through import costs. If ICE cotton stabilizes near 87 cents, imported cotton landed prices will lock in accordingly, requiring spinners to make more refined scheduling decisions on raw material inventories. Purchasing managers in fabric clusters such as Keqiao and Shengze should closely watch the window for internal-external cotton price spread changes.