The U.S. cotton belt is experiencing an unexpected decline in crop quality. The latest USDA weekly crop progress report shows that as of the week ending June 28, the good-to-excellent rate for U.S. cotton fell sharply from 53% the prior week to 48%. This represents a 5 percentage point drop week-over-week and also trails the 51% recorded a year ago. For midstream and downstream textile enterprises that rely on imported cotton, this number signals rising uncertainty in raw material costs for the second half of the year.
Background
The U.S. cotton growing season has entered a critical phase. While overall crop development appears on schedule, quality concerns are emerging. As of June 28, cotton planting reached 97%, above last year's 95% and in line with the five-year average. The squaring rate stood at 37%, slightly below last year's 38% but still within the five-year average of 36%. The boll-setting rate was 9%, matching the five-year average.
From a data distribution perspective, planted acreage is largely locked in, meaning all variability in final production now hinges on yield per acre. The good-to-excellent rate has declined for two consecutive weeks, with the pace accelerating—from 53% to 48%. This is not a short-term weather blip but rather reflects persistent changes in soil moisture or pest pressure across major growing regions.
The futures market has reacted immediately. The Zhengzhou Commodity Exchange cotton main contract for September 2026 closed at 16,070 yuan per ton on June 29, up 210 yuan from the previous trading day. Trading volume and open interest remain elevated, indicating that fundamental bullish signals are resonating with speculative capital, providing strong short-term price support.
Industry Impact
The direct consequence of the declining good-to-excellent rate is that expectations of tighter supply are being priced in ahead of time. The current ZCE main contract corresponds to the 2026/27 new crop, and the market is already discounting the risk of lower yields. For domestic cotton textile enterprises—especially those relying on U.S. cotton for high-count yarn and combed yarn production—this signal carries several implications:
- Procurement window is narrowing: If the good-to-excellent rate continues to decline, quality segregation for new-crop U.S. cotton may become stricter, further widening premiums for high-grade cotton. Companies need to lock in forward contracts early to avoid being forced to accept high prices for lower-quality supply at harvest.
- Substitution effects will emerge: The cost-effectiveness of Brazilian, Indian, and Xinjiang cotton will be re-evaluated. If U.S. cotton prices strengthen persistently due to yield concerns, some orders may shift to other origins, altering global cotton trade flows and regional price spreads.
- Downward cost pressure on weaving and fabric sectors will increase: Cotton yarn prices typically lag cotton futures by 2-4 weeks. With current cotton yarn inventories at moderately low levels, once raw material costs rise steadily, the willingness to raise prices in the gray fabric and finished fabric segments will grow significantly, ultimately impacting the price competitiveness of garment orders.
It is worth noting that the good-to-excellent data is updated weekly, and the weather window from mid-July to early August will be critical in determining final yields. If the good-to-excellent rate stabilizes or rebounds over the next two weeks, current production-cut expectations may be partially revised, exposing the futures market to correction risk.