The cost-side support for cotton is becoming clear again. The December contract on ICE settled at 87.28 cents per pound, up 0.96 cents or 1.11%, just one session after touching a three-week low of 85.56 cents. At the same time, Brent crude settled above $100 per barrel, its highest level since late May. Taken together, these two price signals suggest that cotton's cost competitiveness against polyester is being passively restored.
The Cost Logic Regains the Upper Hand
The transmission path from crude oil to cotton is not complicated. PTA and MEG, the core raw materials for polyester, both come from the petroleum cracking chain. Higher oil prices directly raise the production cost of the substitute fiber. When cotton prices have themselves just gone through a correction, the price-performance gap between the two naturally narrows. For downstream spinners and fabric mills, this means that re-evaluating the blending ratio of chemical fibers in their cotton-mix formulas now has real economic significance.
A weaker dollar amplifies this effect further. The dollar index hovered near a two-week low, making dollar-denominated commodities cheaper for overseas buyers, which in theory should stimulate some international purchasing demand. However, the impact of exchange rate factors on actual transactions tends to lag, manifesting in the short term more as a pickup in inquiry activity than an immediate surge in order volumes.
The Supply-Side Tug of War
What truly makes the market hesitant is the contradictory signals coming from the supply side. The USDA's weekly crop progress report showed that as of the week ending September 6, the good-to-excellent rating for US cotton fell to 34%, down from 39% the previous week and well below 54% a year earlier. That is not a small decline, indicating that growing conditions in major US producing areas are indeed deteriorating. But the same report also showed that the US cotton harvest was 7% complete, matching last year's pace and slightly above the five-year average of 6%, suggesting that harvest progress has not slowed despite the quality deterioration.
The situation in the Southern Hemisphere constitutes another layer of pressure. Consultancy Agroconsult raised its estimate for Brazil's 2025/26 lint cotton production to a record 4.5 million tonnes, an increase of about 300,000 tonnes from its previous forecast, citing improved yields found during field surveys. Brazil's continued production growth is changing the flow of global cotton trade, squeezing the traditional export shares of US and Australian cotton.
On the inventory front, no additional direction has emerged for now. ICE data showed that as of September 8, deliverable No. 2 cotton contract stocks stood at 54,414 bales, unchanged from the previous trading day. This figure itself is not a driving factor, but it indicates that near-month physical delivery pressure is currently limited.
Wait-and-See Sentiment Ahead of the Report
The market's real focus is on the USDA's upcoming global agricultural supply and demand estimates report. Traders need to recalibrate their judgment on US and global cotton supply and demand through this report, especially against the backdrop of an imminent full-scale harvest in the Northern Hemisphere and recent price weakness.
The spot market is likewise waiting for direction. The Cotlook A Index stood at 96.10 cents per pound, up 10 points on the day — a modest gain that reflects the physical market's reluctance to chase the futures rally. This mild divergence between futures and spot typically signals that traders remain skeptical about the sustainability of the current rebound.
From the perspective of industrial belts, the core contradiction facing domestic textile enterprises is not the absolute level of cotton prices but insufficient order visibility. If price fluctuations on the raw material side cannot translate into improved downstream orders, spinning mills will struggle to pass cost pressures through smoothly. This is why the current rebound is more likely to manifest as a range repair than a trend reversal.