82.71 cents per pound — that was the settlement price for the ICE December cotton contract on September 25, down 0.72% on the day but still up 1.92% for the week. A falling session inside a rising week tells you that cotton prices are not being driven by a single force right now, but rather caught in a tug-of-war between macroeconomic pressure and fundamental support. For the textile supply chain, this kind of oscillation is more dangerous than a one-way trend, because it narrows the window for raw material cost planning and shrinks the margin for error in procurement decisions.
Breaking Down the Bull and Bear Factors
On the bearish side, the stronger dollar was the most direct headwind this week. The dollar index held near a two-month high touched in the previous session and was on track for a second consecutive weekly gain. After the Federal Reserve raised rates by 25 basis points in September, officials' comments conveyed both inflation concerns and support for further tightening, fueling expectations of a more aggressive monetary policy path and driving US Treasury yields sharply higher. Rogers Varner, president of VarnerBrokerage, put it plainly: the dollar has broken upward, and while the move is not huge, it is enough.
External markets added pressure as well. Chicago wheat futures fell as traders bet on diplomatic efforts to ease Black Sea export disruptions. Crude oil dropped more than 2% as the market weighed a possible US-Iran ceasefire against Houthi attacks on Saudi Arabia. Lower oil prices directly reduce polyester production costs, eroding cotton's price competitiveness against substitute fibers. This means that even if cotton's own fundamentals hold up, the downward shift in chemical fiber costs will continue to compress the upside potential for cotton prices from below.
Export Data and Drought Signals
What actually held the weekly gain together was the USDA's weekly export sales report. For the week ending September 17, current-crop US upland cotton net sales reached 230,517 bales, a significant increase of 224% from the prior week and 244% from the four-week average. Next-crop net sales totaled 122,994 bales. But there is a structural detail worth noting: current-crop net sales to China decreased by 4,702 bales, and next-crop net sales to China stood at zero. Strong overall export growth and the absence of Chinese buying are happening at the same time.
Meanwhile, forward supply risks are accumulating. A drought document compiled by the USDA's Office of the Chief Economist from the US Drought Monitor showed that as of the week ending September 22, about 72% of US cotton-producing areas were affected by drought, up from 65% the prior week and compared with just 49% a year earlier. The rapid expansion of drought coverage implies downward pressure on new-crop yield potential. Strong exports plus drought in producing regions together form a medium-term floor for cotton prices.
The spot market pointed in the same direction. On September 25, the Cotlook A Index stood at 93.75 cents per pound, up 50 points. The weekly gain in futures and the rise in the spot index reinforce each other, suggesting the price center has not materially shifted lower despite the single-day decline.
Transmission to the Supply Chain
For Chinese textile enterprises, this round of price action carries three layers of information. First, currency factors are becoming the primary short-term driver of cotton price volatility. The dollar's direction is reflected in the market faster than supply and demand data, and exporters need to incorporate currency expectations into their cost models when locking in prices. Second, the spread between polyester and cotton may widen again as oil prices fall. Mills with a high share of chemical fibers in their product mix face relatively manageable short-term raw material pressure, but pure cotton categories will face intensified competition from substitutes. Third, the absence of Chinese buying in US cotton exports may push domestic procurement toward Brazilian, Australian, or Xinjiang cotton, making regional rebalancing of the supply chain worth watching.
Over a longer horizon, the 72% drought-affected area is a number that cannot be ignored. If the drought persists, US new-crop production expectations will be revised downward, and the pricing logic for forward contracts could shift from demand-driven to supply-driven. For buyers, the current price range may be a window to lock in some forward positions, but the proportion should be controlled to avoid excessive exposure amid macroeconomic uncertainty.