Heavy and persistent rainfall across US cotton-growing regions during the boll-opening window is repricing quality risk in the global cotton market. The most-active December ICE cotton contract settled at 78.88 cents/lb on Friday, up 1.12 cents on the day, yet still posted a weekly loss of 4.6%. The coexistence of a daily rebound and a sharp weekly decline suggests the market has not escaped its downtrend; the weather theme merely offered a brief pause.
Weather Premium vs. Weak Demand
The boll-opening stage determines fiber length, strength and color. Once exposed cotton fibers are hit by heavy rain, quality grades decline, and accompanying thunderstorms and strong winds can cause real yield losses. This means the supply of deliverable high-grade US cotton may tighten this season, posing potential pressure on mills sourcing raw material for high-count yarns.
Yet the weather premium failed to reverse the weekly slump. A stronger US dollar directly raised the cost of US cotton for overseas buyers, while demand itself was already softening. USDA export sales data showed that for the week ended September 24, current-crop US upland cotton net sales reached 202,567 bales, down 12% week-on-week, with net sales to China at 38,370 bales. Shipments also weakened, with upland cotton export shipments at 149,507 bales, down 9% week-on-week, and only 1,323 bales shipped to China.
More notably, net sales of next-crop US cotton to China stood at zero. This signal is more concerning than a single week's decline—it reflects Chinese buyers' wait-and-see stance on new-crop procurement, likely linked to the domestic-international price spread, quota policy and low downstream order visibility.
Oil Price Slide Transmits to Fiber Substitutes
The G7 agreed to coordinate the release of 100 million barrels of strategic petroleum reserves through the International Energy Agency, starting immediately and lasting four months, with a concentrated release of diesel in the first 20 days. The news pressured international oil prices, with European diesel futures falling more than 4%.
The logic linking lower oil prices to cotton is substitute competition. Polyester, a petroleum-based synthetic fiber, is the primary alternative to cotton in yarns and fabrics. Lower oil prices reduce polyester production costs, making synthetic fibers more competitive and squeezing demand for natural fibers. For buyers, this means the cotton-polyester spread may widen again, opening a window for adjusting blend ratios.
The spot market weakened in tandem. The Cotlook A Index stood at 88.35 cents/lb, down 80 points, confirming the soft demand landscape.
Industry Impact and Outlook
Cotton prices are currently caught between weather premium and macroeconomic pressure. Rain threats in US regions provide bottom support, but a stronger dollar, declining export shipments and lower oil prices cap the upside. In the short term, the market will continue trading around the actual damage during the US boll-opening period; whether the weather premium persists depends on verifiable quality downgrades.
For Chinese textile clusters, imported cotton procurement costs rise with the stronger dollar, but the weekly decline in international cotton prices offers some offset. Mills in Keqiao and Shengze need to watch two variables: whether high-grade US cotton supply tightens due to rain, affecting high-count yarn blending; and whether polyester prices falling with oil accelerate cotton-polyester substitution.
In the medium term, China's wait-and-see stance on new-crop US cotton may shift import structures toward Brazilian and Australian cotton. Exporters should reassess diversified sourcing to prevent single-origin weather risks from transmitting to delivery schedules.